When shopping you notice that a pair of jeans costs $20 and that a tee-shirt costs $10.You compute the price of jeans relative to tee-shirts.
A)The dollar price of jeans and the relative price of jeans are both nominal variables.
B)The dollar price of jeans and the relative price of jeans are both real variables.
C)The dollar price of jeans is a nominal variable;the relative price of jeans is a real variable.
D)The dollar price of jeans is a real variable;the relative price of jeans is a nominal variable.

Question

Quizplus · Accepted Answer

The dollar price of jeans is a nominal variable because it is the actual price in dollars, and it does not take into account any changes in inflation or purchasing power. On the other hand, the relative price of jeans is a real variable because it tells us how expensive jeans are compared to other goods or the average price level. It takes into account changes in inflation and purchasing power, making it a more accurate measure of the true cost of jeans. Therefore, the best choice is C: The dollar price of jeans is a nominal variable; the relative price of jeans is a real variable.

When Shopping You Notice That a Pair of Jeans Costs