is typically known as the very high and accelerating inflation.
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The equation of exchange
conveys how a change in the money supply affects macroeconomy.
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Loanable funds
money available for borrowing and lending.
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nominal interest rate
The supply of money curve is vertical since it is not affected if the ________ moves higher or lower.
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The vertical axis
on the money market graph measures the nominal interest rate, and it indicates that it is not adjusted for inflation.
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borrowers
The high cost prohibits some ________ and discourages others.
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Classical Dichotomy
theory that states a change in the money supply will affect nominal variables in the economy but not real variables.
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Financial Intermediation
is the task of getting funds from savers (lenders) to spenders (borrowers)
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Price level P
can be measured with the GDP Deflator.
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Ms
is the supply of money and Md is the demand of money.
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Real variables
things that are expressed in non- monetary units or adjusted for inflation.
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real rate of interest
When the ________ is low, the quantity of funds demanded is higher, leading the demand curve to slope downward.
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Money supply
can be defined as M1 or M2, where the velocity of money is the number of times the typical dollar of M1 or M2 is used to make purchases during a year.
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interest rates
when they’re are high, the households and firms pare down the amount of money they hold in their wallets and transaction accounts where it earns little to no interest.
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income rises
When ________, households and firms want to have more money on hand due to the fact that they conduct more transactions or more expensive transactions.
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The money market
is determined by the supply and demand for money.
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nominal interest rate
The amount of money supplied to the economy which is determined by the Fed and isnt affected by a change in the ________.
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nominal interest rate
A rise in the ________ induced people and firms to place their funds where it can earn the higher return.
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Velocity of Money
the number of times a typical unit of money is used for purchases in a year
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The Quantity Theory of Money
the idea that inflation is almost proportional to the growth rate of the money supply
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Hyperinflation
is typically known as the very high and accelerating inflation
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Classical Dichotomy
theory that states a change in the money supply will affect nominal variables in the economy but not real variables
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A Nominal Figure
is an unadjusted rate or price, without taking inflation or other factors into account
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Nominal Interest Rate
the interest rate as states and not adjusted for inflation
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Financial Intermediation
is the task of getting funds from savers (lenders) to spenders (borrowers)
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Financial Intermediary
any firm or institution that participates in financial intermediation
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Loanable funds
money available for borrowing and lending
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Real interest rate
the interest rate adjusted for inflation
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Real variables
things that are expressed in non-monetary units or adjusted for inflation
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The demand for money
is the amount of money households, firms, and government, and foreign entities want to hold as currency and in their transaction accounts
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