Details Title: 1051H Chapter 30 Description: Gregory Mankiw Textbook Definitions. Jeffrey Milyo's Econ Class Total Flash Cards: 17 Created: 11/05/2008 09:07:07		New Users: To study from this flashcard set, or to create your own your own study flash cards, REGISTER HERE. Existing Users: CLICK HERE. Additional Economics Flashcards
Cards in this set: Term inflation Definition the increase in overall level of prices, does not decrease real purchasing power because sellers also get more for what they sell Term deflation Definition a decrease in overall level of prices Term hyperinflation Definition an extraordinarily high rate of inflation (> 50% per month) Term long run money supply Definition In the long run, the overall level of prices adjusts to the level at which the demand for money equals the supply. Term quantity theory of money Definition a theory asserting that the quantity of money available determines the price level and that the growth rate in the quantity of money available determines the inflation rate. Term nominal variables Definition variables measured in monetary units Term real variables Definition variables measured in physical units Term classical dichotomy Definition the theoretical separation of nominal and real variables Term monetary neutrality Definition the proposition that changes in the money supply do not affect real variables Term velocity of money Definition the rate at which money changes hands Term quantity equation Definition the equation M x V = P x Y which relates the quantity of money, the velocity of money, and the dollar value of the economy's output of goods and services. Term inflation tax Definition the revenue the government raises by creating money, it is like a tax on everyone who holds money Term Fisher effect Definition the one-for-one adjustment of the nominal interest rate to the inflation rate Term LR result of Fed increasing rate of money growth Definition both a higher inflation rate and a higher nominal interest rate Term shoeleather costs Definition the resources wasted when inflation encourages people to reduce their money holdings Term menu costs Definition the costs of changing prices, inflation increases the menu costs that firms must bear Term capital gains Definition the profits made by selling an asset for more than its purchase price