1. 0.6 Donuts/1.67 Donuts/$6.00/$10.00 2. (increase/decrease/remain the same) an

Question

1. 0.6 Donuts/1.67 Donuts/$6.00/$10.00

2. (increase/decrease/remain the same) and (increase/decrease/remain the same)

3. (does not affect/affects) and (affects/does not affect)

1. (Borrowers/lenders)

2. (Rise/Fall)

2. (Capital/debt/deposits/loans/reserves)

3. (1.84/1.95/3.94/5.35)

4. (1.84/1.95/3.94/5.35)

The classical dichotomy is the separation of real and nominal variables. The following questions test your understanding of this distinction Kate spends all of her money on comic books and donuts. In 2008 she earned $15.00 per hour, the price of a comic book 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. Kate's wage is $15.00 per hour in 2008. The price of a donut is 0.6 comic books in 2008. The price of a donut is $3.00 in 2008. Which of the following give the real value of a variable? Check all that apply. Kate's wage is 5 donuts per hour in 2008. The price of a comic book is $5.00 The price of a comic book is 1.67 d 0.6 donuts 1.67 donuts $6.00 $10.00 Suppose that the Fed sharply increases the m comic book is $10.00 and the price of a donu tween 2008 and 2013. In 2013, Kate's wage has risen to $30.00 per hour. The price of a In 2013, the relative price of a comic book is Between 2008 and 2013, the nominal value of Kate's wage and the real value of her wage al Monetary neutrality is the proposition that a change in the money supply nominal variables and real variahles

Explanation / Answer

Ans: (a) Nominal value = Kate's wage is $15

(b) Real value = all options apply

(c) Between 2008 2013 Nominal value rise and real value fall

(d) Chnage in inflation harms lenders

(e) When bank borrow $100, it would increase the reserve account and increase the debt account.

(f) Capital requirement = minimum leverage ratio.

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