The classical dichotomy and the neutrality of moneyThe classical dichotomy is the separation of real and nominal variables. The
following questions test your understanding of this distinction.Maria spends all of her money on paperback novels and beignets. In 2011 she earned $27.00 per hour, the price of a paperback novel was $9.00, and the price of a beignet was $3.00.Which of the following give the nominal value of a variable? Check all that apply.-The price of a beignet is $3.00 in 2011.-Maria's wage is $27.00 per hour in 2011.-The price of a beignet is 0.33 paperback novels in 2011.Which of the following give the real value of a variable? Check all that apply.-The price of a paperback novel is 3 beignets in 2011.-Maria's wage is 9 beignets per hour in 2011.-The price of a paperback novel is $9.00 in 2011.Suppose that the Fed sharply increases the money supply between 2011 and 2016. In 2016, Maria's wage has risen to $54.00 per hour. The price of a paperback novel is $18.00 and the price of a beignet is $6.00.In 2016, the relative price of a paperback novel is _(6$,18$,3 Beignets, .33 Beignets)________Between 2011 and 2016, the nominal value of Maria's wage (increases/decreases/remains the same) and the real value of her wage (increases/decreases/reamins the same)Monetary neutrality is the proposition that a change in the money supply (Does not affect, affects) nominal variables and (Does not affect, Affects) real variables.
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