Our earlier economist developed a model called Classical dichotomy and Money neutrality. Classical dichotomy is the separation of variables into real variables (those that measure quantiy or relative price) and nominal variables (those measured in terms of money). In the libg run,. money changes does not affect real variables. Therefore, money is neutral in the long run. Money does not matter in a classical world. If the quantity of money in the economy were to double, everything would cost twice as much, and everyones income would be twice as high. But so what? the change would be nominal (by the standard meaning of nearly insignificant). Things that people really care about - whether they have a job, how many goods and services they can afford and so on, would still be the same (Mankwi; 2011: 723).
Posted on: Mon, 27 Oct 2014 22:33:19 +0000
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