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According to the Classical Dichotomy, in the long-run,
Select Option realnominal
variables are
Select Option dependentindependent
from the
Select Option monetaryfiscal
side of the economy. As such, classical economists believed in the long-run
Select Option neutralitypotential
of money. Specifically, real variables can only be affected by other
Select Option realnominal
variables. For example, an improvement in potential GDP could be caused by
Select Option an increase in the money supplyan increase in human capital
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