In 2016, the relative price of a paperback novel is . (0.6 donuts , 1.67 donuts

Question

In 2016, the relative price of a paperback novel is .(0.6 donuts , 1.67 donuts , $6.00 , $10.00)

Between 2011 and 2016, the nominal value of Cho's wage (Decreases , Increases, remains the same) , and the real value of her wage (Increases , decreases , remains the same)   .

Monetary neutrality is the proposition that a change in the money supply (affects , does not affect)   nominal variables and (affects , does not affect)   real variables.

3. 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 Cho spends all of her money on paperback novels and donuts. In 2011, she earned $15.00 per hour, the price of a paperback novel was $5.00, and the price of a donut was $3.00. Which of the following give the nominal value of a variable? Check all that apply. Cho's wage is $15.00 per hour in 2011 The price of a donut is $3.00 in 2011 The price of a donut is 0.6 paperback novels in 2011. Which of the following give the real value of a variable? Check all that apply. Cho's wage is 5 donuts per hour in 2011. The price of a paperback novel is 1.67 donuts in 2011 The price of a paperback novel is $5.00 in 2011

Explanation / Answer

Answer 1:

Option A and option B gives nominal value of a variable. The level of wage rate in 2011 and price of donut in 2011 represents nominal value of a variable.

Answer 2:

Option B. The price of paper back novel is 1.67 donuts in 2011.When price of one is expressed in terms of another, then it is a real variable.

1.67 donuts as price of 1 donut is equal to $6 and price of one novel is $10.

Increases

Remains the same.

Affect

Does not affect

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