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Unformatted text preview: Intermediate acroeconomic Bruce Pre ton February 25, 2010 Today Ination in the long run Next wek: Chapter 9 and 10 Short-run uctuation So Far Focu ha ben gi en to the real ide of the economy Now introduce nominal ide Require di cu ion of ination Require di cu ion of money Ination Ination i dened a the percentage change in ome mea ure of price Often the CPI - con umer price index P t +1 P t P t Hyperination : period of extremely high ination - maybe 50 percent per month Not ob er ed in modern US economic hi tory But: ob er ed in other countrie What i oney? oney ha e eral function It i a unit of acount: god are mea ure in dolar It pro ide a tore of alue It facilitate economic tran action I ued curency caled at money Not backed by a real a et Ha alue to the extent that people anticipate it wil be acepted a a mean of payment ea uring oney Variou concept of money that depend on liquidity onetary ba e: curency plu re er e of the banking y tem 1: onetary ba e plu demand depo it 2: 1 plu a ing and money market acount Quantity Theory of...
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