Term
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Definition
| the increase in overall level of prices, does not decrease real purchasing power because sellers also get more for what they sell |
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Term
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Definition
| a decrease in overall level of prices |
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Term
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Definition
| an extraordinarily high rate of inflation (> 50% per month) |
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Term
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Definition
| In the long run, the overall level of prices adjusts to the level at which the demand for money equals the supply. |
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Term
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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. |
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Term
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Definition
| variables measured in monetary units |
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Term
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Definition
| variables measured in physical units |
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Term
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Definition
| the theoretical separation of nominal and real variables |
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Term
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Definition
| the proposition that changes in the money supply do not affect real variables |
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Term
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Definition
| the rate at which money changes hands |
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Term
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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. |
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Term
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Definition
| the revenue the government raises by creating money, it is like a tax on everyone who holds money |
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Term
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Definition
| the one-for-one adjustment of the nominal interest rate to the inflation rate |
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Term
| LR result of Fed increasing rate of money growth |
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Definition
| both a higher inflation rate and a higher nominal interest rate |
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Term
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Definition
| the resources wasted when inflation encourages people to reduce their money holdings |
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Term
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Definition
| the costs of changing prices, inflation increases the menu costs that firms must bear |
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Term
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Definition
| the profits made by selling an asset for more than its purchase price |
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