{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

ol22 - 1 P level pp pay more for Velocity of M v=(Px y/M...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
1. P level , pp pay more for G&S they buy. =>P level is measure of value of m. P level => lower value of my b.c each dollar buys a smaller Q of G&S. 2. Q of money => dollars more plentiful=> P level => each dollar less valuable. 3. Nominal variables measured in monetary units .real variables measured in physical units. Ex income of corn farmers is nominal variables: measured in dollars. Quantity of corn produced is real variables: measured in bushels. According to principle of monetary neutrality, Q of money affect NV not RV 4. G revenue by printing m => levy an inflation tax. B.c prints money, P level , dollars less valuable. inflation is like a tax on pp holding m. G high spending, inadequate tax revenue, printing dollars is the easiest way to pay for its spending. Massive Q of m leads to massive inflation. 5. According to the Fisher effect, inflation rate does not affect real interest rate b.c real interest rate is real variable. The nominal interest rate must adjust one-for-one to
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

Ask a homework question - tutors are online