he classical dichotomyis 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 2012, 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 realvalue of a variable?Check all that apply.

Sofia's wage is 7 macchiatos per hour in 2012.

Sofia's wage is $28.00 per hour in 2012.

The price of a paperback is 1.75 macchiatos in 2012.

Which of the following give the nominalvalue of a variable?Check all that apply.

Sofia's wage is $28.00 per hour in 2012.

Sofia's wage is 4 paperbacks per hour in 2012.

The price of a macchiato is $4.00 in 2012.

Suppose that the Fed sharply increases the money supply between 2012 and 2017. In 2017, 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 2017, the relative price of a paperback is_________ .

Between 2012 and 2017, the nominal value of Sofia'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.