Question

what is classical dichotomy

Answer 1

In macroeconomics, the classical dichotomy is the idea, attributed to classical and pre-Keynesian economics, that real and nominal variables can be analyzed separately. To be precise, an economy exhibits the classical dichotomy if real variables such as output and real interest rates can be completely analyzed without considering what is happening to their nominal counterparts, the money value of output and the interest rate. In particular, this means that real GDP and other real variables can be determined without knowing the level of the nominal money supply or the rate of inflation. An economy exhibits the classical dichotomy if money is neutral, affecting only the price level, not real variables.[citation needed]

The classical dichotomy was integral to the thinking of some pre-Keynesian economists ("money as a veil") as a long-run proposition and is found today in new classical theories of macroeconomics.

Answer 2

Hey There! A classical economic concept that states general price levels may be influenced by monetary forces yet there is not real affect on activity.