Answered: The classical dichotomy is the…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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

Kyoko spends all of her money on comic books and beignets. In 2012 she earned $27.00 per hour, the price of a comic book was $9.00, and the price of a beignet was $3.00.

NOTE:

Here are the drop down question choices

In 2017, the relative price of a comic book is ______ (0.33 beignets OR 3 beignets OR $6.00 OR $18.00)

Between 2012 and 2017, the nominal value of Kyoko's wage _______ (decreases OR increases OR remains the same) and the real value of her wage _______ (decreases OR 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 _______ (affects OR does not affect) real variables.

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.
Kyoko spends all of her money on comic books and beignets. In 2012 she earned $27.00 per hour, the price of a comic book was $9.00, and the price
of a beignet was $3.00.
Which of the following give the nominal value of a variable? Check all that apply.
O Kyoko's wage is $27.00 per hour in 2012.
The price of a beignet is 0.33 comic books in 2012.
The price of a beignet is $3.00 in 2012.
Which of the following give the real value of a variable? Check all that apply.
O Kyoko's wage is 9 beignets per hour in 2012.
The price of a comic book is $9.00 in 2012.
O The price of a comic book is 3 beignets in 2012.
Suppose that the Bank of Canada sharply increases the money supply between 2012 and 2017. In 2017, Kyoko's wage has risen to $54.00 per hour.
The price of a comic book is $18.00 and the price of a beignet is $6.00.
In 2017, the relative price of a comic book is
Between 2012 and 2017, the nominal value of Kyoko'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.

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