Macroeconomics ch 30
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Quantity theory of money
A theory asserting that the quantity of money available dtermines the price and that the growth rate in the quantity of money available determines the inflation rate.
Variables measured in monetary units.
Variables measured in physical units.
The theoretical separation of nominal and ral variables.
The proposition that changes in the money supply do not affect real variables.
Velocity of money
The rate at which money changes hands.
The equation M x V = P x Y relates the quantity of money, the velocity of money, and the dollar value of the economy's output of goods and services
The revenue the government raises by creating money.
The one-for-one adjustment of the nominal interest rate to the inflation rate.
The resources wasted when inflation encourages people to reduce thier money holdings.
The costs of changing prices.
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