CLASSICAL MACRO SYSTEM

June 2015, Paper-II
Question no: 1
In the Classical macro system, money determines?
a) Employment
b) Real output
c) Both (a) & (b)
d) Neither (a) or (b)
Answer D
In macroeconomics, the classical dichotomy is the idea, attributed to classical and pre Keynesian economics, that real and nominal variables can be analyzed separately. The classical dichotomy (Patinkin, 1965) refers to the idea that real variables, like output and employment, are independent of monetary variables. In this view, the primary function of money is to act as a lubricant for the efficient production and exchange of commodities