Question

The 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.A. The price of a beignet is $3.00 in 2011.B. Maria's wage is $27.00 per hour in 2011.C. The price of a beignet is 0.33 paperback novels in 2011.

Answer 1

Answer:

Maria spends all of her money on paperback novels and beignets In 2011 she Earned $27 per hour, the price of a paperback novel was $9, and the price of a beignet was $3.

Following give the nominal value of a variable: -

• The price of a beignet is $3 in 2011
• Maria's wage is $27 per hour in 2011

Following give the real value of a variable:

• The price of a paperback novel is 3 beignets in 2011
• Maria's wage is 9 beignets per hour in 2011.

Suppose that the Fed sharply macaws the money supply between 2011 and 2016 In 2016, Maria's wage has risen to $54 per hour. The price of a paperback novel is $18 and the price of a beignet is $6

In 2016, the relative price of a paperback novel is  3 beignet

Between 2011 and 2016, the nominal value of Maria's wage increases and the real value of her wage remains the same.

Monetary neutrality is the proposition that a change in the money supply affecis nominal variables and does not affecis real variables