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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
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. Kate spends all of her money on paperback novels and doughnuts. In 2014 she earned $27.00 per hour, the price of a paperback novel was $9.00, and the price of a doughnut was $3.00. Which of the following give the nominal value of a variable? Check all that apply. The price of a doughnut is 0.33 paperback novels in 2014. Kate's wage is 3 paperback novels per hour in 2014. O Kate's wage is $27.00 per hour in 2014. Which of the following give the real value of a variable? Check all that apply. O Kate's wage is $27.00 per hour in 2014. The price of a paperback novel is $9.00 in 2014. Kate's wage is 9 doughnuts per hour in 2014. Suppose that the Bank of Canada sharply increases the money supply between 2014 and 2019. In 2019, Kate's wage has risen to $54.00 per hour. The price of a paperback novel is $18.00 and the price of a doughnut is $6.00. In 2019, the relative price of a paperback novel is Between 2014 and 2019, the nominal value of Kate'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
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