ECON 2120: Principles of Macroeconomics - Inflation and the Quantity Theory of Money

These flashcards cover key terms and concepts related to inflation and the quantity theory of money from the Principles of Macroeconomics lecture.

Inflation

An increase in the average level of prices.

Inflation Rate (𝝅𝒕)

The percentage change in the average level of prices over a time period.

Consumer Price Index (CPI)

Measures the average price for a basket of goods and services bought by a typical American consumer.

GDP Deflator

The ratio of nominal to real GDP multiplied by 100, covering all final goods.

Producer Price Index (PPI)

Measures the average price received by producers for intermediate as well as final goods.

Velocity of Money (𝒗)

The average number of times a dollar is spent on final goods and services in a year.

Nominal GDP

The market value of all final goods and services produced in a country in a given period without adjusting for inflation.

Real Prices

Prices that have been adjusted for inflation, allowing for comparison over time.

Commodity Money

A good used for transactions that also has intrinsic value, such as gold or silver.

Fiat Money

Currency that has no intrinsic value and is established as money by government regulation.

Medium of Exchange

One of the functions of money, used for the exchange of goods and services.

Store of Value

The function of money that allows it to retain its value over time.

Quantity Theory of Money

A theory that describes the relationship between money supply, velocity, real output, and price levels.