Business
The classical dichotomy is the separation of real and nominal variables. The following questions test your understanding of this distinction.Hannah divides all of her income between spending on paperbacks and lattes. In 2012, she earned an hourly wage of $28.00, the price of a paperback was $7.00, and the price of a latte was $4.00.#1 Which of the following gives the real value of a variable? Check all that apply.- The price of a paperback is 1.75 lattes in 2012.- The price of a paperback is $7.00 in 2012.- Hannah's wage is 7 lattes per hour in 2012.#2 Which of the following give the nominal value of a variable? Check all that apply.- The price of a latte is $4.00 in 2012.- The price of a latte is 0.57 paperbacks in 2012.- Hannah's wage is $28.00 per hour in 2012.Suppose that the Fed sharply increased the money supply between 2012 and 2017. In 2017, Hannah's wage rose to $56.00 per hour. The price of a paperback is $14.00, and the price of a latte is $8.00.#3 In 2017, the relative price of a paperback was ___________. Options: .57 lattes, 1.75 lattes, $8 or $14.00#4 and #5 Between 2012 and 2017, the nominal value of Hannah's wage____________, and the real value of her wage________________. Options: Increase or Decrease#6 and #7 Monetary neutrality is the proposition that a change in the money supply _______________ nominal variables and ____________ real variables. Options: Increase or Decrease