The Classical Dichotomy Argues That Changes in the Money Supply

question 46

Multiple Choice

The classical dichotomy argues that changes in the money supply

• A)affect both nominal and real variables.
• B)affect neither nominal nor real variables.
• C)affect nominal variables,but not real variables.
• D)do not affect nominal variables,but do affect real variables.

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Definitions:

Break-Even Point

The point at which total costs and total revenues are equal, resulting in no net loss or gain for a business.

Shutdown Point

The level of output and price at which a company's revenue just covers its variable costs, below which the company would lose more money if it continued to operate.

Short Run

A period in economic analysis where at least one input is fixed and cannot change, influencing decision-making and production.

Long Run

An economic period sufficiently long enough to allow all inputs or factors of production to be varied or adjusted, as opposed to the short run where some inputs are fixed.