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Macroeconomics
Lecture 14
Inflation and the
Quantity Theory of Money
Chapter 12
Questions?
Inflation
Cause:
Printing money faster than
making goods and services
Effect:
Rising prices
Nominal or Current
vs.
Real or Constant
Quantity Theory of
Money
M = Money Supply
v = velocity
P = Price Level
YR = Real GDP
v = velocity
The average number of
times a dollar is used to
purchase final goods and
services within a year
Mv = PYR
Assume v andYR are
constant
M = P
M = P
Inflation is
everywhere and
always a monetary
phenomenon
- Milton Friedman
1834 to 1933
$1 =1/20 oz of gold
$20 = one oz of gold
$1,320
66x
paper currency has
loss of 98.5% of value
Costs of Inflation
uncertainty
illusion
redistribution
tax bracket creep
Redistribution
public to government
lenders to borrowers
Redistribution
nominal = real +
inflation
real can be negative
Guessing
Expected Inflation
vs.
Actual Inflation
Who wins?
Inflation Winners Losers
Lower than
Expected
Lenders Borrowers
Higher than
Expected
Borrowers Lenders
Tax Bracket Creep
10%
20%
Higher tax bracket
Pay more but not earn more
Exam 2
Review
Chapters 8-12
Growth Models
The Financial System
Stock Market
Unemployment
Inflation
Growth Models
Types
Solow 3 equation
Romer
Solution
Financial System
Income - Consumption
Saving - Borrowing
Supply and Demand
Types of Debt
Types of Firms
Financial Statements
Stock Market
Finance Equation
FutureValue - PresentValue
Indexes
Leverage
Bubbles
Unemployment
Definitions
Two rates
Problems
Types
Insurance
Minimum Wage
Efficiency Wages
Inflation
Prices
Current and Constant
Mv = PYR
M = P
Costs
Exam 2
Thursday and Friday
by 5pm on Friday
Calculator

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The various stages, after the initial invitation has been made to the public ...The various stages, after the initial invitation has been made to the public ...
The various stages, after the initial invitation has been made to the public ...
 

Macro 14