Most economists believe that real economic variables and nominal economic variables behave independently of each other in the long run.For example, an increase in the money supply, avariable, will cause the price level, avariable, to increase but will haveno long-run effect on the quantity of goods and services the economy can produce, avariable. The distinction between real variablesand nominal variables is known asIn the short run, however, most economists believe that real and nominal variables are intertwined. Economists use the model of aggregate demandand aggregate supply to examine the economy's short-run fluctuations around the long-run output level. The following graph shows an incompleteshort-run aggregate demand (AD) and aggregate supply (AS) diagram-it needs appropriate labels for the axes and curves. You will identify some ofthe missing labels in the questions that follow.ASADHORIZONTAL AXISVERTICAL AXIS~) ASADHORIZONTAL AXISThe horizontal axis of the aggregate demand and aggregate supply model measures the overallThe aggregatecurve shows the quantity of goods and services that firms produce and sell at each price level.VERTICAL AXIS

Economic Variable is defined as a measurement which describes economic units such as interest rates,…

Answered: Most economists believe that real…

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter18: Introduction To Macroeconomics: Unemployment, Inflation, And Economic Fluctuations

Section: Chapter Questions

Problem 13P

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The classical dichotomy is the separation of real and nominal variables. The following questions test your understanding of this distinction. Eileen spends all of her money on paperback novels and mandarins. In 2015, she earned $27.00 per hour, the price of a paperback novel was $9.00, and the price of a mandarin was $3.00. Which of the following give the nominal value of a variable? Check all that apply. Eileen's wage is $27.00 per hour in 2015. The price of a mandarin is $3.00 in 2015. Eileen's wage is 3 paperback novels per hour in 2015. Which of the following give the real value of a variable? Check all that apply. Eileen's wage is 9 mandarins per hour in 2015. The price of a paperback novel is 3 mandarins in 2015. Eileen's wage is $27.00 per hour in 2015. Suppose that the Fed sharply increases the money supply between 2015 and 2020. In 2020, Eileen's wage has risen to $54.00 per hour. The price of a paperback novel…
The classical dichotomy is the separation of real and nominal variables. The following questions test your understanding of this distinction. Lucia spends all of her money on comic books and beignets. In 2012, she earned $15.00 per hour, the price of a comic book was $5.00, and the price of a beignet was $3.00. Which of the following give the nominal value of a variable? Check all that apply. a. Lucia's wage is 3 comic books per hour in 2012. b. Lucia's wage is $15.00 per hour in 2012. c. The price of a beignet is 0.6 comic books in 2012. Which of the following give the real value of a variable? Check all that apply. a. Lucia's wage is $15.00 per hour in 2012. b. Lucia's wage is 5 beignets per hour in 2012. c. The price of a comic book is $5.00 in 2012. Suppose that the Fed sharply increases the money supply between 2012 and 2017. In 2017, Lucia's wage has risen to $30.00 per hour. The price of a comic book is $10.00 and the price of a beignet is $6.00.…
The classical dichotomy is the separation of real and nominal variables. The following questions test your understanding of this distinction. Susan spends all of her money on magazines and mandarins. In 2015, she earned $18.00 per hour, the price of a magazine was $9.00, and the price of a mandarin was $2.00. Which of the following give the nominal value of a variable? Check all that apply. Susan's wage is $18.00 per hour in 2015. Susan's wage is 2 magazines per hour in 2015. The price of a mandarin is $2.00 in 2015. Which of the following give the real value of a variable? Check all that apply. Susan's wage is 9 mandarins per hour in 2015. Susan's wage is $18.00 per hour in 2015. The price of a magazine is 4.5 mandarins in 2015. Suppose that the Fed sharply increases the money supply between 2015 and 2020. In 2020, Susan's wage has risen to $36.00 per hour. The price of a magazine is $18.00 and the price of a mandarin is…
When we say that economic fluctuations are “irregular and unpredictable,” we mean thata. the relationship between output and unemployment is erratic and difficult to characterize.b. when one macroeconomic variable that measures income or spending is falling, other macroeconomic variables that measure income or spending are likely to be rising.c. recessions do not occur at regular intervals.d. All of the above are correct.
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hello, I need help with my homework The Real-Nominal Principle Apply the real-nominal principle. 5.1 Your savings account pays 4 percent per year: Each $100 in the bank grows to $104 over a 1-year period. If prices increase by 3 percent per year, by keeping $100 in the bank for a year you gain $ . My Textbook: macroeconomics by o’Sullivan 10th addition 978 013 519 6434 thank you
Interest, inflation, and purchasing power Suppose Dalia is a fan of young-adult fiction and buys only young-adult books. Dalia deposits $2,000 into a savings account that pays an annual nominal interest rate of 20%. Assume this interest rate is fixed, and so it will not change over time. On the day she makes her deposit, suppose that a young-adult book has a price of $20.00. Initially, Dalia's $2,000 deposit has a purchasing power of #????? young-adult books. For each of the annual inflation rates given in the following table, first determine the new price of a young-adult book, assuming it rises at the rate of inflation. Then enter the corresponding purchasing power of Dalia's deposit after one year in the first row of the table for each inflation rate. Finally, enter the value for the real interest rate at each of the given inflation rates. Hint: Round your answers in the first row down to the nearest young-adult book. For example, if you find that the deposit will cover…
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