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

Rina spends all of her money on comic books and beignets. In 2011 she earned $14.00 per hour, the price of a comic book 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.

__ Rina's wage is 2 comic books per hour in 2011.

__The price of a beignet is $2.00 in 2011.

__ Rina's wage is $14.00 per hour in 2011.

Which of the following give the real value of a variable? Check all that apply.

__Rina's wage is $14.00 per hour in 2011.

__The price of a comic book is 3.5 beignets in 2011.

__Rina's wage is 7 beignets per hour in 2011.

Suppose that the Fed sharply increases the money supply between 2011 and 2016. In 2016, Rina's wage has risen to $28.00 per hour. The price of a comic book is $14.00 and the price of a beignet is $4.00.

In 2016, the relative price of a comic book is ( 0.29 beignets, 3.5 beignets, $4.00, $14.00)

Between 2011 and 2016, the nominal value of Rina's wage (decreases, increases, remains the same) and the real value of her wage(decreases, increases, remains the same) .

Monetary neutrality is the proposition that a change in the money supply (does not affect, affect) nominal variables and ( does not affect, affect) real variables.