lecture4 - Lecture 4 CHAPTER 4 Money and Inflation slide 1...

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CHAPTER 4 CHAPTER 4 Money and Inflation Money and Inflation slide 1 Lecture 4
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CHAPTER 4 CHAPTER 4 Money and Inflation Money and Inflation slide 2 In this chapter you will learn In this chapter you will learn The classical theory of inflation causes effects social costs “Classical” -- assumes prices are flexible &  markets clear. Applies to the long run. 
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CHAPTER 4 CHAPTER 4 Money and Inflation Money and Inflation slide 3 U.S. inflation & its trend, U.S. inflation & its trend, 1960-2001 1960-2001 0 2 4 6 8 10 12 14 16 1960 1965 1970 1975 1980 1985 1990 1995 2000 % per year inflation rate
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CHAPTER 4 CHAPTER 4 Money and Inflation Money and Inflation slide 4 U.S. inflation & its trend, U.S. inflation & its trend, 1960-2001 1960-2001 0 2 4 6 8 10 12 14 16 1960 1965 1970 1975 1980 1985 1990 1995 2000 % per year inflation rate inflation rate trend
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CHAPTER 4 CHAPTER 4 Money and Inflation Money and Inflation slide 5 The connection between The connection between money and prices money and prices Inflation rate = the percentage increase  in the average level of prices.  price = amount of money required to  buy a good.  Because prices are defined in terms of  money, we need to consider the nature of  money,  the supply of money, and how it is controlled.
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CHAPTER 4 CHAPTER 4 Money and Inflation Money and Inflation slide 6 Money: definition Money: definition Money Money  is the stock   is the stock  of assets that can be  of assets that can be  readily used to make  readily used to make  transactions. transactions.
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CHAPTER 4 CHAPTER 4 Money and Inflation Money and Inflation slide 7 Money: functions Money: functions 1. medium of exchange we use it to buy stuff 2. store of value transfers purchasing power from the  present to the future 3. unit of account the common unit by which everyone  measures prices and values
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CHAPTER 4 CHAPTER 4 Money and Inflation Money and Inflation slide 8 Money: types Money: types 1. fiat money has no intrinsic value example:  the paper currency we use 2. commodity money has intrinsic value examples:  gold coins,  cigarettes in P.O.W. camps
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CHAPTER 4 CHAPTER 4 Money and Inflation Money and Inflation slide 9 Discussion Question Discussion Question Which of these are money?   a. Currency b. Checks c. Deposits in checking accounts  (called  demand deposits ) d. Credit cards e. Certificates of deposit  (called  time deposits )
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CHAPTER 4 CHAPTER 4 Money and Inflation Money and Inflation slide 10 The money supply & monetary policy The money supply & monetary policy The  money supply  is the quantity of  money available in the economy.  Monetary policy  is the control over  the money supply.  
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CHAPTER 4 CHAPTER 4 Money and Inflation Money and Inflation slide 11 The central bank The central bank Monetary policy is conducted by a country’s  central bank .   In the U.S.,  the central  bank is  called the  Federal  Reserve   (“the  Fed ”).   The Federal Reserve Building Washington, DC
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This note was uploaded on 04/14/2010 for the course ECON 3353 taught by Professor Prodan during the Spring '05 term at University of Alabama - Huntsville.

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lecture4 - Lecture 4 CHAPTER 4 Money and Inflation slide 1...

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