Question
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
The classical dichotomy and the neutrality of money
Theclassical dichotomyis the separation of real and nominal variables. The following questions test your understanding of this distinction.
Megan spends all of her money on comic books and donuts. In 2015, she earned $27.00 per hour, the price of a comic book was $9.00, and the price of a donut was $3.00.
Which of the following give thenominalvalue of a variable?Check all that apply.
Megan's wage is 3 comic books per hour in 2015.
The price of a donut is 0.33 comic books in 2015.
The price of a donut is $3.00 in 2015.
Which of the following give therealvalue of a variable?Check all that apply.
Megan's wage is $27.00 per hour in 2015.
The price of a comic book is $9.00 in 2015.
The price of a comic book is 3 donuts in 2015.
Suppose that the Fed sharply increases the money supply between 2015 and 2020. In 2020, Megan's wage has risen to $54.00 per hour. The price of a comic book is $18.00 and the price of a donut is $6.00.
In 2020, the relative price of a comic book is .
Between 2015 and 2020, the nominal value of Megan'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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