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Banking and Monetary Policy_Butkiewicz_Date__050410

Banking and Monetary Policy_Butkiewicz_Date__050410 - 19...

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Chapter 14 3: hyperinflation—a very severe inflation 5: high inflation means whatever entity in charge of money is printing it rapidly 6: money and inflation related in the long run 7: velocity- how fast money turns over 8: (M) money supply (P) price level (Y) real output - VM=PY 9: inverse relationship between money holding and velocity - Money is something you “want” to get rid of very quickly 11: Each % change has an economic meaning - %P- growth money supply - %Y- independent from anything with money supply - How fast central bank prints money determines inflation (long run) 12: Know/Understand these Graphs - Short term: not much relationship between growth and inflation - Long term: there is a relationship between growth and inflation 18: commodity money - Example: gold (availability determines growth of money supply) - Fiat $ (Fed chooses growth rate)
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Unformatted text preview: 19: mistaken belief that stimulating the economy would permanently decrease unemployment rate 20: if real output is growing, money supply and V are constant than prices must fall (deflation) 21: prices were falling but burden of debt increase even though earning less income 22: “Free Silver”= unlimited NOT free 24: not all central bankers are independent—some can come about political pressure-Example: Nixon-Policy makers don’t want to be the ones to increase unemployment 25: government introducing money- reduce purchasing power of previous money—seniorage revenue 28: 30,000% Monthly Rate—prices go up per customer 32: inflation cannot reduce living standards on average (not everybody is worse off) 36: increases disparity of income—social unrest and unhappiness...
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