________- the proposition that changes in the money supply do not affect real variables.
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Classical dichotomy
________- the theoretical separation of nominal and real variables.
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Fisher effect
________- the one- for- one adjustment of the nominal interest rate to the inflation rate.
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Inflation
________ makes investors less able to sort successful from unsuccessful firms.
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Inflation tax
________- the revenue the government raises by creating money.
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Deflation
________ is rarely as steady and predictable.
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P × Y
Because velocity is stable, when the central bank changes the quantity of money (M), it causes proportionate changes in the nominal value of output (________)
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Quantity equation
the equation M × V= P × Y, which relates the quantity of money, the velocity of money, and the dollar value of the economys output of goods and services.
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Shoeleather costs
________- the resources wasted when inflation encourages people to reduce their money holdings.
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10
Inflation
________ does not in itself reduce peoples real purchasing power.
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