How to answer?

You can ask her to tell YOU about the people and places that she is talking about.
You can ask her questions (if they do not upset her) like:
How did you get there?
What are you doing?
What is the weather like?
Who are the people?
What do they do?
(this information might come in handy if she asks YOU questions about where and who.)
If she asks YOU about the people or place simply tell her that you forgot about it or you don't remember the people. If she insists then try changing the subject. Ask her if she wants a piece of fruit, a glass of iced tea, some water, go for a walk.....

Talking to herself I would not worry about. I do that a lot and if I had to worry about it I would not get anything done.

If this is upsetting to her at all discuss it with the doctor. There are medications that can be prescribed for anxiety.

You can't make up nonsensical answers to what your wife deems to be perfectly logical questions. Because then you are treating her like an idiot, and she'll pick up on that. Dementia does not mean the woman has become brain dead; just that she has a short term memory deficit. She's still IN there, just not functioning 100% like she once did. She deserves to be treated with dignity & respect now, stiill, even though she's saddled with something debilitating like dementia.

When my mother with advanced dementia would insist on knowing where her mother was (her mother died 37 years prior), a few times I told her 'your mom is living in the Bahamas now b/c it's too cold in Colorado for such an old lady.' She threw me a sharp look and yelled I KNOW YOU'RE LYING, SO CUT IT OUT. So I had to come up with a more believable story about where her mother was and not treat her like she was an idiot, silly me. Lesson learned.

You have to come up with a believable story for your wife, whatever that may be, I can't tell you. Just as long as it's not a nonsensical story of some kind. When she's very persistent, that can be a sign of anxiety which means she may need a small dose of calming meds to help relax her, thereby diverting her attention from the subject that's driving her to distraction. Ativan .25 mgs helped my mother A LOT when she was insistent on finding her mother who she felt was 'hiding' from her at the Memory Care. No amount of 'diversion' was going to get her off the topic, so the meds did the trick. She was increased to .5 mgs as her agitation and anxiety increased. She wasn't zombied out..........just relaxed enough to be functional and not harping on where the dead relatives were at any given time.

If you are going to keep your wife at home & be her caregiver, I suggest you read this 33 page booklet (which is a free download) which has THE best information ever about managing dementia and what to expect with an elder who's been diagnosed with it.

Understanding the Dementia Experience, by Jennifer Ghent-Fuller 
https://www.smashwords.com/books/view/210580

Jennifer is a nurse who worked for many years as an educator and counsellor for people with dementia and their families, as well as others in caring roles. She addresses the emotional and grief issues in the contexts in which they arise for families living with dementia.

The full copy of her book is available here:
https://www.amazon.com/Thoughtful-Dementia-Care-Understanding-Experience/dp/B09WN439CC/ref=sr_1_2?crid=2E7WWE9X5UFXR&keywords=jennifer+ghent+fuller+books&qid=1657468364&sprefix=jennifer+ghent%2Caps%2C631&sr=8-2

She also has published a workbook entitled, “It Isn’t Common Sense: Interacting with People Who Have Memory Loss Due to Dementia.”
https://www.amazon.com/Isnt-Common-Sense-Interacting-Dementia/dp/1481995995/ref=sr_1_4?crid=2E7WWE9X5UFXR&keywords=jennifer+ghent+fuller+books&qid=1657468655&sprefix=jennifer+ghent%2Caps%2C631&sr=8-4

The 36 Hour Day is another great reference type of book to get. Teepa Snow has some excellent videos on YouTube you can watch to learn how to best interact with your wife and enter HER world now that she's riddled with dementia.

Best of luck to you.

Keep doing what you’re doing. As for when she asks something that you don’t know, such as, “where is Buggy Boop,” make something up. For instance, “Buggy Boop went to Africa on safari. He needed to go see his pet giraffe.” You can make up more details as it continues, and she won’t remember anything about it anyway. Or if she inquires, “Buggy is doing fine. He’s having giraffe stew for dinner. Hey, why don’t we have stew tonight?” Just blah blah blah. It’s no use expecting meaningful conversation anymore, that’s the way it goes after a while. Sorry.

When my mom became increasingly out of touch with reality due to dementia I was advised to use “validation therapy.” Agree with the delusions. One day mom was upset that dad (dead two years) wasn’t home from work yet. I made a “pretend” call to his office and told her no one was there so he must be on the way home. She said, “someone is always there!” But soon she was convinced he was on the way home and was able to relax. I never considered this as treating her like an idiot. Rather it was an acceptance of her condition and the only way to engage with her. Of note: she was in late stages of dementia.

My husband comes to me with mixed-up questions or statements that sounds like he expects a reply. At first I instantly worried that I would reply incorrectly and he'd feel insulted, but that feeling left pretty quickly when I stopped expecting him to comprehend either of our words.

When he doesn't articulate sensibly, I reply with anything that conveys absolute confidence and praise in him. For example I'd say how observant he is, or how I admire him for being so capable. "How did you manage to do that so well?" Or, "You joker. My sweet cookie you, you're so terrific". I never spoke like that before but he's a shaky child now.

Whatever, and I mean whatever, I say always trumps his initial confused thought because he can't remember what he's trying to convey. And he always makes a hair pin turn going with my reply or statement rather than his train of scrambled eggs.

Your plan of attack -
(Of course I'm being subjective. This is how I manage my husband).
Keep in mind that there are two fronts to deal with. Fractured thoughts, and the chemical reaction, (the message), that the confused thought sends to the body.
A strange thought may have triggered a feeling of fear, sadness or sense of loss that can't be identified or reasoned away.
And so you can try saying, "Oh, I'm glad you brought that up…"
["glad" translates to "good". She needs to hear or think "good". I did something good. I said something useful, so I'm good. (She still has an ego), as a result, we hope, she'll feel good. And then her thoughts will be all turned around, again hopefully, to What are we talking about?] and you continue with, "I would've forgotten otherwise. I meant to ask you if you had a preference for lunch".
Or, "Crazy as it sounds, I wanted to go to the bakery for a coffee and a Napoleon pastry. What do you think? We can bring it home if you'd rather."
Or, "Funny thing how that reminds me of a song you loved. What was the name of it? No matter, it'll come to me later. I'd love to play some easy listening, or soft rock music. Would you like a juice or split a peach with me?"
Or, "Hey, I'm sorry to interrupt, but before I forget, did I tell you that you look like a million bucks. Oh man, I just remembered it's the weekend. There's a game show I wanted to watch with you. I think it's called Cash Cab. George said it's great".
Improv baby. Amaze yourself.

I approach my husband as a dance partner from time to time and we fox trot, one of two dances he muscle remembers from our few Arthur Murray lessons 17 years ago. The monsters leave, he melts, and he doesn't feel so desperately alone in his skin. Alone. I think that's the most identifiable look on his face. That and the other heart-piercing expression, the searching look.

My husband recently started to talk to himself as well. He's picking at his fingers bloody again too. My thoughts are that I'm not keeping him busy enough. I can do but so much, and so yesterday he was registered to join a memory adult day care center for two days a week. It's not going to be easy for me financially or logistically. Up to 8 hours of care, (we'll probably do 6 to start) and a 45 minute drive to drop him off, but after all these years I'll take it.
Good luck to you.

There's always a "new thing" with dementia and it's not always possible to plan ahead with your problem solving. I found it best with my husband to take one day at a time and ask God to help me find solutions. The "36 Hour Day" is a great resource book.

This is typical behavior of people with dementia. One woman I knew talked to the TV as if it was a real person. Others found comfort in dolls and stuffed animals, and treated them like living things. You are to be commended for the care you are giving your wife, but have a plan in case her care gets to be more than you can handle. It is very likely that her mental and physical capabilities will continue to decline over time. Get connected with a local social worker who can explain your wifes (and your) options. Your basic options are having in-home aides, or placing her in a memory care facility. The advantage of assisted living is that there will be skilled staff who know how to care for people with dementia. If you chose this route, find a place close to you so that you can visit often. All the best to you both.

I try to gently discuss whatever my husband seems to see or feel. One morning he thought we were in Tom Brady’s house and we had to leave so we don’t get in trouble. I walked him around our house and pointed out things I knew he should recognize. He kept saying yes it looks like our house but it was Tom Brady’s house. After a bit he finally accepted we were at home. He was tested by a neuropsychologist and she explained it actually has a name…. Reduplicative Paramnesia. It has only happened a few times but it really helped knowing there was a name for it. She also gave me names for other issues I had dealt with… Motor Perseveration and Confabulation. I highly recommend Neuropsychological testing as it helped me identify and better understand what my husband was doing was not something I could change or stop. I still lose my patience at times but remembering that helps me relax more. When he has hallucinations I walk him over to them so he can try and touch them and they go away. I’m sure there maybe a time that no longer works but for now that’s how I’m coping. You can Google those labels and learn more. The more I learn, the easier it is to accept and love the “new” way he is. Some days he thinks we are suppose to do something or go somewhere. I have try to gently discuss it with him because there actually have been a couple of times I had forgotten something! 🙂. It becomes so easy to dismiss things he asks about… sometimes he is just calling it the wrong name.

Make an appointment to meet with Geriatric Psychiatrist who can prescribe medications and evaluating the situation. If you can video her, the doctor will see what you see. Someone else suggested purchasing an ALEXA machine.

Sample: Do not answer in untruths, but generalities. Hugs sent during this most difficult of times.