Which of the following is a characteristic of the 'Classical Dichotomy'?
A. Money affects real output in the long run
B. Only fiscal policy is neutral
C. Real and nominal variables are determined separately and money is neutral
D. Real and nominal variables are always interdependent
Answer: Option C
Solution (By JKSSB Mock Tests)
The classical dichotomy is the proposition that real variables (output, employment, relative prices) are determined independently of nominal variables and that money is neutral in the long run.
Explanation:
The semi-strong form of the efficient market hypothesis asserts that stock prices adjust rapidly to all publicly available information, so that neither technical nor fundamental analysis can yield abnormal returns.
Explanation:
Open Market Operations (buying and selling of government securities by RBI) is a quantitative tool that affects the overall volume of credit and money supply.
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