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7 Cards in this Set
- Front
- Back
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def of velocity
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rate at which money changes hands in transactions
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equation for velocity
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V = (P x Y) / M
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2 assumptions about V and Y
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V is constant
Y is determined by quantity of inputs |
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the quantity theory of money assumptions and relationship
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quantity of money determines the price level and the growth rate in quantity of money determines inflation
How prices and money are related |
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shoeleather costs
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resources wasted when inflation encourages people to reduce their money holdings
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menu costs
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costs of changing prices
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Inflation Fallacy
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people think that falling purchasing power is the primary cost of inflation in the long run.
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