An example of a real variable is

a. the nominal interest rate.
b. the ratio of the value of wages to the price of soda.
c. the price of corn.
d. the dollar wage.
e. none of the above.

1 answer

A real variable is one that has been adjusted for inflation, reflecting the true purchasing power of money. In contrast, a nominal variable is measured in current prices and does not take inflation into account.

Among the options provided:

a. the nominal interest rate - This is not a real variable, as it does not account for inflation. b. the ratio of the value of wages to the price of soda - This represents a real variable, as it relates wages (which can be seen in real terms) to the price of a good. c. the price of corn - This is generally considered a nominal variable, as it reflects current market prices without an adjustment for inflation. d. the dollar wage - This is also a nominal variable, as it reflects the current wage rate without accounting for inflation.

Given these interpretations, the best answer indicating a real variable is:

b. the ratio of the value of wages to the price of soda.