3. 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 of this distinction. Yesmina divides all of her income between spending on digital movie rentals and Americanos. In 2017, she earned an hourly wage of $28.00, the pric of a digital movie rental 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. The price of a digital movie rental is $7.00 in 2017. The price of a digital movie rental is 1.75 Americanos in 2017. Yesmina's wage is 7 Americanos per hour in 2017. Which of the following give the nominal value of a variable? Check all that apply. The price of a Americano is 0.57 digital movie rentals in 2017. The price of a Americano is $4.00 in 2017. Yesmina's wage is $28.00 per hour in 2017. Suppose that the Fed sharply increases the money supply between 2017 and 2022. In 2022, Yesmina's wage has risen to $56.00 per hour. The price of a digital movie rental is $14.00 and the price of a Americano is $8.00. In 2022, the relative price of a digital movie rental is Between 2017 and 2022, the nominal value of Yesmina's wage Monetary neutrality is the proposition that a change in the money supply variables. and the real value of her wage " nominal variables and real
3. 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 of this distinction. Yesmina divides all of her income between spending on digital movie rentals and Americanos. In 2017, she earned an hourly wage of $28.00, the pric of a digital movie rental 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. The price of a digital movie rental is $7.00 in 2017. The price of a digital movie rental is 1.75 Americanos in 2017. Yesmina's wage is 7 Americanos per hour in 2017. Which of the following give the nominal value of a variable? Check all that apply. The price of a Americano is 0.57 digital movie rentals in 2017. The price of a Americano is $4.00 in 2017. Yesmina's wage is $28.00 per hour in 2017. Suppose that the Fed sharply increases the money supply between 2017 and 2022. In 2022, Yesmina's wage has risen to $56.00 per hour. The price of a digital movie rental is $14.00 and the price of a Americano is $8.00. In 2022, the relative price of a digital movie rental is Between 2017 and 2022, the nominal value of Yesmina's wage Monetary neutrality is the proposition that a change in the money supply variables. and the real value of her wage " nominal variables and real
Chapter1: Making Economics Decisions
Section: Chapter Questions
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Concept explainers
IS-LM-PC Analysis
The IS (Investment Saving), LM (Liquidity Preference- Money Supply), and PC (Philips Curve) is the model that looks at the dynamics of output and inflation. It takes into account the central bank policy decision to adjust the inflation and real interest rate in the economy. It enables the economist to weather to priorities between employment and inflation rate analyzing the model. It is a practice-driven approach adopted by economists worldwide.
IS-LM Analysis
The term IS stands for Investment, Savings, and LM stands for Liquidity Preference, Money Supply. Therefore, the term IS-LM model is known as Investment Savings – Liquidity preference money Supply. This model was introduced by a Keynesian macroeconomic theory which shows the relationship between the economic goods market and loanable funds market or money market. In other words, it shows how the market for real goods interacts with the financial markets to strike a balance between the interest rate and total output in the macroeconomy. This particular model is designed in the form of a graphical representation of the Keynesian economic theory principle. The output and money are the two important factors in an economy.
Question
Transcribed Image Text:3. 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 of this distinction.
Yesmina divides all of her income between spending on digital movie rentals and Americanos. In 2017, she earned an hourly wage of $28.00, the price
of a digital movie rental 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.
The price of a digital movie rental is $7.00 in 2017.
The price of a digital movie rental is 1.75 Americanos in 2017.
Yesmina's wage is 7 Americanos per hour in 2017.
Which of the following give the nominal value of a variable? Check all that apply.
The price of a Americano is 0.57 digital movie rentals in 2017.
The price of a Americano is $4.00 in 2017.
Yesmina's wage is $28.00 per hour in 2017.
Suppose that the Fed sharply increases the money supply between 2017 and 2022. In 2022, Yesmina's wage has risen to $56.00 per hour. The price
of a digital movie rental is $14.00 and the price of a Americano is $8.00.
In 2022, the relative price of a digital movie rental is
Between 2017 and 2022, the nominal value of Yesmina's wage
Monetary neutrality is the proposition that a change in the money supply
variables.
and the real value of her wage
nominal variables and
real
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