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. Ana spends all of her money on magazines and doughnuts. In 2012 she earned $27.00 per hour, the price of a magazine was $9.00Jr and the price of a doughnut was $3.00. Which of the following give the nominal value of a variable? Check all that apply. C] Ana's wage is 3 magazines per hour in 2012. C] The price of a doughnut is $3.00 in 2012. C] Ana's wage is $27.00 per hour in 2012. Which of the following give the real value of a variable? Check all that apply. C] Ana's wage is 9 doughnuts per hour in 2012. C] Ana's wage is $27.00 per hour in 201.2. C] The price of a magazine is 3 doughnuts in 2012. Suppose that the Bank of Canada sharply increases the money supply between 2012 and 2017. [n 2017, Ana's wage has risen to $54.00 per hour. The price of a magazine is $18.00 and the price of a doughnut is $6.00. In 201?f the relative price of a magazine is V . Between 2012 and 2017, the nominal value of Ana's wage Y and the real value of her wage V . Monetary neutrality is the proposition that a change in the money supply V nominal variables and V real variables. Ana's wage is 9 doughnuts per hour in 2012. Ana's wage is $27.00 per hour in an 0.33 doughnuts The price of a magazine is 3 doug 3 doughnuts ose that the Bank of Canada sharply in $6.00 supply between 2012 and of a magazine is $18.00 and the price 6.00. $18.00 017, the relative price of a magazine is veen 2012 and 2017, the nominal value of Ana's wage and th etary neutrality is the proposition that a change in the money supply ables.O Ana's wage is 9 doughnuts per hour in 2012. Ana's wage is $27.00 per hour in 2012. The price of a magazine is 3 doughnuts in 2012. ose that the Bank of Canada sharply increases the mo 2012 and 2017. In 2017, Ana's wag decreases of a magazine is $18.00 and the price of a doughnut increases 17, the relative price of a magazine is remains the same een 2012 and 2017, the nominal value of Ana's wage and the real value of her wage etary neutrality is the proposition that a change in the money supply nominal variables arney supply between 2012 and 2017. In 2017, Ana's wag per increases s $6.00. decreases remains the same and the real value of her wage money supply nominal variables and reae of a magazine is does not affect the nominal value of Ana's wage e real value of her wage affects proposition that a change in the money supply nominal variables anddoes not affect s wage V and the real value of her wage affects e in the money supply nominal variables and real
