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Chapter 12 - 2 Money Supply Money Demand Monetary...

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Chapter 12 - Money Growth and Inflation 1. The Classical Theory of Inflation - Developed by some of the earliest thinkers about economy. 1. Level of Prices and the Value of Money - Price level can be viewed as price of a basket of goods or as a measure of the value of money. - When overall price level rises, money value falls. P=number of dollars needed to buy goods. 1/P=money measured in terms of goods and services.
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Unformatted text preview: 2. Money Supply, Money Demand, Monetary Equilibrium- S&D determines the value of money-Demand for money reflects how much wealth people want to hold in liquid form- Money demanded depends on the Interest rate that a person could earn by using the money to buy an interestbearing bond. A. The average level of prices in the economy.-...
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