Answer to Question #163399 in Statistics and Probability for Tazrian

Question

Identify each of the following as nominal or real variables. (a) the physical output of goods and services (b) the overall price level (c) the dollar price of a meat pie (d) the price of beef relative to the price of chicken (e) the selling price of stock in the stock market (f) the amount of goods you can purchase with the wage you earn each hour (g) the personal taxes that you pay the government 

Answer 1

The nominal value is measured in terms of actual prices that exist at the time. The real value refers to the same statistic after it has been adjusted for inflation. So here we have:

(a) the physical output of goods and services - real variable

(b) the overall price level - nominal variable

(c) the dollar price of a meat pie - nominal variable

(d) the price of beef relative to the price of chicken - real variable

(e) the selling price of stock in the stock market - real variable

(f) the amount of goods you can purchase with the wage you earn each hour - real variable

(g) the personal taxes that you pay the government - nominal variable