Principles of Mac Chap 17
amounts of money people are willing to hold at different price levels.
'Money Demand' is the:
Fisher effect
the one-for-one adjustment of the nominal interest rate to the inflation rate
monetary neutrality
the proposition that changes in the money supply do not affect real variables
velocity of money
the rate at which money changes hands
shoeleather costs
the resources wasted when inflation encourages people to reduce their money holdings
inflation tax
the revenue the government raises by creating money
classical dichotomy (division into usually two parts)
the theoretical separation of nominal and real variables
nominal variables
variables measured in monetary units
real variables
variables measured in physical units
quantity theory of money
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
nominal variables are expressed in monetary units and real variables are expressed in physical units.
According to the Classical Dichotomy:
changes in the money supply do not affect real variables.
According to the principle of monetary neutrality:
P x Y must increase.
If the Fed increased the supply of money, and velocity remains unchanged, according to the quantity equation:
the rate at which money changes hands.
The velocity of money is:
better, worse
When inflation turns out to be higher than expected, borrowers will be ________ off, and lenders will be ________ off.
right, increase
When the Fed adds more money to the economy, the Money Supply curve shifts to the ________, causing the equilibrium price level to ________.
the value of money decreases in the economy.
When there is inflation:
menu costs
the costs of changing prices
quantity equation
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