If the Classical Dichotomy Holds a Change in Monetary Policy

question 52

Multiple Choice

If the classical dichotomy holds a change in monetary policy, it ________ and ________.

• A) increases employment; reduces taxes
• B) has no real effects; only affects nominal variables
• C) changes output; has no influence on inflation
• D) will reduce unemployment; cannot increase inflation
• E) has no nominal effects; only moves real variables

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Definitions:

Horizontal Demand Curve

Represents a situation in which the demand for a product is perfectly elastic, indicating that consumers are willing to purchase any quantity of the product at a specific price.

Differentiated Product

A product that is distinguished from similar products in the market by unique characteristics or features, often leading to brand loyalty.

Horizontal Demand Curve

Represents a situation in economics where the demand for a good is extremely sensitive to changes in price, indicative of perfect elasticity.

Oligopolist

A company operating within an oligopoly market structure, where a small number of firms have a large majority of market share and can influence prices and competition.