Question

FILL IN THE BLANK:

3. The classical dichotomy and the neutrality of money The classical dichotomy is the separation of real and nominal variables. The following guestions test your understanding of this distinction. Megan spends all of her money on paperback novels and beignets. In 2012, she earned $14.00 per hour, the price of a paperback novel was $7.00, and the price of a beignet was $2.00 Which of the following give the nominal value of a variable? Check all that apply. The price of a beignet is $2.00 in 2012. Megan's wage is $14.00 per hour in 2012 Megan's wage is 2 paperback novels per hour in 2012 Which of the following give the real value of a variable? Check all that apply. The price of a paperback novel is 3.5 beignets in 2012. Megan's wage is 7 beignets per hour in 2012 Megan's wage is $14.00 per hour in 2012. Suppose that the Fed sharply increases the money supply between 2012 and 2017. In 2017, Megan's wage has risen to $28.00 per hour. The price of a paperback novel is $14.00 and the price of a beignet is $4.00. In 2017, the relative price of a paperback novel is Between 2012 and 2017, 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

In 2017, the relative price of a paperback novel is .29 beignets, 3.5 beignets, $4.00, or $14.00 .

Between 2012 and 2017, the nominal value of Megan's wage decreases, increases, or remains the same , and the real value of her wage decreases, increases, or remains the same .

Monetary neutrality is the proposition that a change in the money supply does not affect or affects nominal variables and does not affect or affects real variables.

Answer 1

The nominal value of a variable - option(A) and (B)

The real value of a variable - option(A) and (B)

Blanks-

1) 14/4 = 3.5 beignets

2) increases

3) remains the same

4) affects

5) does not affect