Details Title: Ch 12:Money,Intrst & Inflation Description: Unit 4 - Foundations of Macroeconomics Total Flash Cards: 10 Created: 01/22/2008 11:33:28		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 Quantity of Money Demanded Definition The amount of money that households and firms choose to hold Term Demand for Money Definition The relationship between the quantity of money demanded and the nominal interest rate, when all other influences on the amount of money that people wish to hold to remain the same Term Supply of Money Definition The relationship between the quantity of money supplied and the nominal interest rate Term Quantity theory of money Definition The proposition that wehn real GDP equals potential GDPm an increase in the quantity of money brings an equal percentage increase in the price level Term Velocity of circulation Definition The number of times in a year that the average dollar of money gets used to buy the final goods and services Term Equation of Exchange Definition An equation that states that the quantity of money multiplied by the velocity of circulation equals the price level multiplied by real GDP Term Hyperinflation Definition Inflation at a rate that exceeds 50% per month Term Explain what determines the demand for money and how the demand for money and the supply of money determine the nominal interest rate Definition P.173 Term Explain how in the long run, the quantity of money determines the price level and the money growth brings inflation Definition P.173 Term Identify the cost of inflation and the benefits of a stable value of money Definition P.173