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. Sofia divides all of her income between spending on paperbacks and macchiatos. In 2016, she earned an hourly wage of $28.00, the price of a paperback was $7.00, and the price of a macchiato was $4.00. Which of the following give the real value of a variable? Check all that apply. (I The price of a paperback is 1.75 macchiatos in 2016. Sofia's wage is 7 macchiatos per hour in 2016. Sofia's wage is $28.00 per hour in 2016. Which of the following give the nominal value of a variable? Check all that apply. The price of a macchiato is $4.00 in 2016. a Sofia's wage is $28.00 per hour in 2016. Sofia's wage is 4 paperbacks per hour in 2016. Suppose that the Fed sharply increases the money supply b 1. In 2021, Sofia's wage has risen to $56.00 per hour. The price of a decreases paperback is $14.00 and the price of a macchiato is $8.00. _ Which of the following give the nominal value of a variable? Check all that apply. The price of a macchiato is $4.00 in 2016. Sofia's wage is $28.00 per hour in 2016. Sofia's wage is 4 paperbacks per hour in 2016. Suppose that the Fed sharply increases the money supply between 2016 and 2021. In 2021, Sofia's wage has risen to $56.00 per hour. The price of a paperback is $14.00 and the price of a macchiato is $8.00. In 2021, the relative price of a paperback is V . Between 2016 and 2021, the nominal value of Sofia's wage v , and the real value of her wage V . Monetary neutrality is the proposition that a change in the money supply V nominal variables and does not affect V real variables