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 paperback novels and donuts. In 2009 she earned $14.00 per hour, the price of a paperback novel was $7.00, and the price of a donut was $2.00.

1: Which of the following give the nominal value of a variable? Check all that apply.

A) The price of a donut is $2.00 in 2009.

B) Rina's wage is $14.00 per hour in 2009.

C) Rina's wage is 2 paperback novels per hour in 2009.

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

A)The price of a paperback novel is 3.5 donuts in 2009.

B)Rina's wage is 7 donuts per hour in 2009.

C)Rina's wage is $14.00 per hour in 2009.

3: Suppose that the Fed sharply increases the money supply between 2009 and 2014. In 2014, Rina's wage has risen to $28.00 per hour. The price of a paperback novel is $14.00 and the price of a donut is $4.00.

In 2014, the relative price of a paperback novel is(.29 donuts/ 3.5 donuts/ $4.00/ $14.00) .

Between 2009 and 2014, the nominal value of Rina's wage(increases/ decreases/ stay the same) and the real value of her wage (increases/ decreases/ stay the same) .

Monetary neutrality is the proposition that a change in the money supply (Affects/ Doesnt affect) nominal variables and (affect/ doesn't affect) real variable