The classical dichotomy is in the classical macro-economic theory the division in two parts of the material and monetary sector of a national economy.

Afterwards the price level on the money market is determined, while the material-economical sizes of (e.g. occupation, real income, material interest rate) on the remaining three markets (goods market, job market, capital market) are determined.

Behind the fact the conception stands that price level effects on a long-term basis evenly affect all material-economical sizes expressed in monetary units, so that the restaurant subjects do not have a cause to change their material-economical arrangements. Examples: With rising wage rate and rising Lohneinkommen the households will not thus change their work offer, if the consumer goods prices rise around the same percentage, so that equal real income remains. Enterprises, whose paragraph prices rise, will nevertheless not additionally invest, although the wages and nominal interest (thus the costs) in exactly the same measure rise etc.

The price level is determined on a long-term basis in this aspect alone by the money offer, has however no durable material effect ((money veil). Among other things the keynesianische opposes this position, with which material and monetary sector in interrelation.

The aspect of the classical dichotomy is unrealistic. Money attitude takes place, because money is useful around transaction costs to complete. This service causes costs, which are connected with the inflation. 1959 recognized Milton Friedman, which minimizes an optimal inflation rate the costs of the money attitude.

Articles in category "Classical dichotomy"

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