Money Growth and Inflation
2 of the 7 costs of inflation
What are:
The slope of the aggregate supply curve in the short run
What is upward sloping?
The definition of monetary policy
What is the supply of money set by the central bank?
A trade deficit in terms of NX and 0
What is NX > 0?
The source of loanable funds
What is national savings?
The quantity equation
What is M x V = P x Y?
The aggregate demand curve equation
What is Y = C + I + G + NX?
The marginal propensity to consume equation
What is MPC = Change in C / Change in Y?
The result of NCO when a transaction increases NX
What is an increase in NCO as well?
This represents net inflow of capital
What is NCO < 0?
The effect of a monetary injection (in terms of graph shifts)
What is MS shifting to the right?
The name of the three types of affects a change in price has on the aggregate demand curve
What are:
The Fed uses monetary policy to shift this curve
What is the AD curve?
The name for the effect on a currency if it can now buy more foreign currency
What is Appreciation (or strengthening)?
The effect on NCO when r falls
What is a rise in NCO?
The definition of the Classical Theory of Inflation
What is prices rise when the government prints too much money?
3 of the 4 reasons the LRAS curve might shift
What are:
The effect of an increase in G or a decrease in T on a graph
What is a rightward shift of the AD curve?
The equation for the net capital outflow
What is Purchase of foreign assets by domestic residents - the purchase of domestic assets by foreigners?
The difference between a tax incentive and a budget deficit
What is their effects on investment?
The difference between real wages and relative prices
What is how they measure prices?; The subjects of the prices?
(Real wage is the price of labor relative to the price of output
The relative price of a good is the price of one good in terms of another)
What do the sticky-wage theory, sticky-price theory, and the misconceptions theory all have in common?
What is Y deviates from YN when P deviates from PE?
The formula for the spending multiplier
What is Change in Y = (1/1-MPC) * Change in G?
The formula for the real exchange rate
What is e x P / P*?
The effect of capital flight