Question

The classical dichotomy is the separation of real and nominal variables. The following questions test your understanding of this distinction.

Tanisha divides all of her income between spending on paperbacks and Americanos. In 2016, she earned an hourly wage of $28.00, the price of a paperback was $7.00, and the price of a Americano was $4.00.
Which of the following give the real value of a variable? Check all that apply.
Tanisha's wage is 7 Americanos per hour in 2016.
The price of a paperback is $7.00 in 2016.
Tanisha's wage is $28.00 per hour in 2016.
Which of the following give the nominal value of a variable? Check all that apply.
Tanisha's wage is $28.00 per hour in 2016.
The price of a Americano is 0.57 paperbacks in 2016.
Tanisha's wage is 4 paperbacks per hour in 2016.
Suppose that the Fed sharply increases the money supply between 2016 and 2021. In 2021, Tanisha's wage has risen to $56.00 per hour. The price of a paperback is $14.00 and the price of a Americano is $8.00.
In 2021, the relative price of a paperback is .
Between 2016 and 2021, the nominal value of Tanisha'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.

Answer 1

The real value of a variable refers to the value of the variable after it has been adjusted for inflation, while the nominal value refers to the value measured in terms of actual prices that exist at the time.

Step-by-step explanation:

The real value of a variable refers to the value of the variable after it has been adjusted for inflation. In this case, the real value of Tanisha's wage in 2016 would be $28.00 per hour. This is because we are considering the wage after it has been adjusted for the increase in the overall level of prices (inflation).

The nominal value of a variable refers to the value of the variable measured in terms of actual prices that exist at the time. In this case, the nominal value of Tanisha's wage in 2016 would also be $28.00 per hour. This is because we are measuring the wage in terms of the actual price in 2016.

Therefore, the real value of Tanisha's wage is $28.00 per hour in 2016, and the nominal value of Tanisha's wage is also $28.00 per hour in 2016.