The classical dichotomy and the neutrality of money The classical dichotomy is t

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The classical dichotomy and the neutrality of money The classical dichotomy is the separation of real and nominal variables. The following questions test your understanding of this distinction.

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 comic books and mandarins. In 2012, she earned $27.00 per hour, the price of a comic book was $9.00, and the price of a mandarin was $3.00. Which of the following give the nominal value of a variable? Check all that apply. The price of a mandarin is $3.00 in 2012. Maria's wage is 3 comic books per hour in 2012. The price of a mandarin is 0.33 comic books in 2012. Which of the following give the real value of a variable? Check all that apply. The price of a comic book is 3 mandarins in 2012 Maria's wage is $27.00 per hour in 2012. The price of a comic book is $9.00 in 2012 Suppose that the Fed sharply increases the money supply between 2012 and 2017. In 2017, Maria's wage has risen to $54.00 per hour. The price of a comic book is $18.00 and the price of a mandarin is $6.00 In 2017, the relative price of a comic book is Between 2012 and 2017, the nominal value of Maria's wage , and the real value of her wage Monetary neutrality is the proposition that a change in the money supply nominal variables and real variables

Explanation / Answer

1)- Nominal value- The prices of mandarins is $ 3.

2)- Real value- The prices of comic book is 3 Mandarins.

3)- Relative price of comic book = 18/6 =3

4)- Nominal value wage = $ 54

5)- Real value wage =27

6)- money neutrality increases nominal variable and unchanged real variable.

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