Term
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Definition
-Will decrease as inflation increases
-will increase as deflation increases |
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Term
| the Quantity theory of money |
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Definition
| The quantity of money available determines the price level and the growth rate of money deteremines the inflation rate. |
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Term
| What determines the value of money? |
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Definition
| Supply and Demand determines the value of money |
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Term
| What controls the supply of money in the real world? |
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Definition
The federal reserve
Banks
peoples decision on how they spend money |
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Term
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Definition
| The inverse of the value of money |
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Term
| Price level and money supply |
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Definition
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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. like relative price of cd in pizzas
Price of CD/Price of Pizza
unaffected by price changes |
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Term
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Definition
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Term
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Definition
| 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. also, the average number of times a dollar bill is used to purchase new goods and services
Velocity = nominal GDP/Money supply =
(P x Y)/M
M x V = P x Y |
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Term
| Is velocity stable over time |
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Definition
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Term
| Q: What happens when there is a change in money Supply |
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Definition
| A: it willl proportionallly affect the nominal value of output or P x Y |
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Term
| what does Economic Growth increase |
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Definition
| the number of transactions |
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Term
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Definition
| when price levels rise 50% per month |
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Term
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Definition
| The revenue gain from the printing of money by the government. Printing money reduces the value of a dollar. acts like a tax |
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Term
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Definition
| the one for one adjustment of nominal interest rates with the inflation rate |
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Term
| What is the worst part of inflation |
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Definition
| money doesnt go as far. can buy less |
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Term
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Definition
| resources wasted when the inflation encourages people to reduce money holdings |
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Term
| Arbitrary distribution of Wealth |
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Definition
| The purchasing power transferred from creditor to debtor in unexpectedly high inflation. |
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