Question

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

Maria spends all of her money on paperback novels and beignets. In 2011 she earned $27.00 per hour, the price of a paperback novel was $9.00, and the price of a beignet was $3.00.
Which of the following give the nominal value of a variable?
A- The price of a beignet is $3.00 in 2011.
B- Maria's wage is $27.00 per hour in 2011.
C- The price of a beignet is 0.33 paperback novels in 2011.

Answer 1

A- The price of a beignet is $3.00 in 2011.

B- Maria's wage is $27.00 per hour in 2011.

Step-by-step explanation:

A nominal variable is a variable expressed in monetary terms. It isn't adjusted for inflation.

Nominal variable = real variable + inflation rate.

A real variable is a variable that has been adjusted for inflation. It is the price of a good or service in terms of another good or service. This is an example of a real variable: The price of a beignet is 0.33 paperback novels in 2011.

I hope my answer helps you