The classical dichotomy is the separation of real and nominal variables. The following questions test your understanding of this distinction. Caroline spends all of her money on magazines and mandarins. In 2013, she earned $27.00 per hour, the price of a magazine was $9.00, and the price of a mandarin was $3.00. Which of the following give the nominal value of a variable? A. Caroline's wage is 3 magazines per hour in 2013.
B. Caroline's wage is $27.00 per hour in 2013.
C. The price of a mandarin is $3.00 in 2013.
Which of the following give the real value of a variable?
A. Caroline's wage is $27.00 per hour in 2013.
B. Caroline's wage is 9 mandarins per hour in 2013.
C. The price of a magazine is 3 mandarins in 2013.
Suppose that the Fed sharply increases the money supply between 2013 and 2018. In 2018, Caroline's wage has risen to $54.00 per hour. The price of a magazine is $18.00 and the price of a mandarin is $6.00.
In 2014, the relative price of a comic book is (0.33 Mandarins / 3 Mandarins / $6.00 / $18.00).
Between 2009 and 2014, the nominal value of Susan's wage (decrease / increase / remain the same) and the real value of her wage (decrease / increase / remain the same) .
Monetary neutrality is the proposition that a change in the money supply (affects / does not affect) nominal variables and (does not affect / affects) real variables.