Nominal And Real Values

Inflation refers to the general increase in prices of goods and services over time. It affects both the real and nominal prices. The nominal price is the price at which a good or service is sold, while the real price takes into account the effect of inflation on purchasing power. As inflation increases, the nominal price of goods and services also tends to increase. This means that the real price, adjusted for inflation, may remain the same or even decrease. Therefore, it is true that inflation can affect the real/nominal price.

The real value of a good refers to its value in terms of actual, tangible resources such as money or physical assets. On the other hand, the relative value of a good refers to its value in comparison to other goods or services. In this context, the question is asking for the value of a good in terms of other goods, indicating that the answer is both real and relative.

Real prices can decrease even if nominal prices increase. This is because real prices take into account the effect of inflation on the purchasing power of money. If nominal prices increase but the rate of inflation is higher, the real prices will actually decrease. Similarly, if nominal prices remain the same but the rate of inflation decreases, the real prices will also decrease. In both cases, the real prices go down, lower, or fall.

The "real" price refers to the price of a product or service in relation to other factors or variables. It is often used to compare prices in different contexts or adjust for inflation. Therefore, the term "relative" is an appropriate alternative to describe the "real" price, as it signifies the comparison or relationship between prices.

The "real" value of a good refers to its actual worth or usefulness in terms of trading and bartering. In a trading and bartering system, goods are exchanged based on their perceived value and usefulness to individuals. This value is not determined by monetary worth, but rather by the practicality and desirability of the good in a given context. Therefore, the correct answer is trading and bartering.

The term "nominal" refers to the value of a good in terms of money. It signifies the face value or the stated value of an item, without taking into account factors such as inflation or market conditions. In other words, the nominal value represents the price or worth of a good as it is stated or recorded, rather than its actual or adjusted value.

Inflation refers to the general increase in prices of goods and services over time, resulting in the decrease in the purchasing power of money. Therefore, the statement "Due to inflation, the dollar is worth more nowadays than it was before" is incorrect. Inflation causes the value of a currency to decrease, not increase. Hence, the correct answer is False.

The real wage is calculated by dividing the nominal wage by the percentage increase in prices since the base year. In this case, the correct answer is 1% because it represents the percentage increase in prices. This means that the real wage is adjusted for a 1% increase in prices since the base year.

The given information states that the nominal price of 5 bananas is around $3. This implies that each banana costs approximately $0.60 ($3 divided by 5).

The given options present the prices of a water bottle, a cactus, and a granola bar. The correct answer is "a granola bar" because it is the only option that provides a specific price, which is not given for the other items. Therefore, the real price of a water bottle remains unknown based on the given information.