Exam 3 Flashcards
(14 cards)
the value of money falls as the price level
rises, because the number of dollars needed to buy a representative basket of goods rises
if the federal reserve purchases government bonds from the public, the federal funds rate
decreases
the inflation tax
is a tax on everyone who holds money
a decrease in the expected inflation rate _______ the nominal interest rate over the long run
decreases
velocity equals
p times y over m
what is the quantity measured along the vertical axis
the value of money
what would cause prices and real GDP to rise in the short run
aggregate demand shifts left
what would cause stagflation
aggregate supply shifts left
what shifts short run but not long run aggregate supply right
a decrease in the expected price level
an economic contraction caused by a shift in aggregate demand remedies itself over time as expected price level
falls, shifting the short run supply left
If P denotes the price of goods and services measured in terms of money, then
1/P represents the value of money measured in terms of goods and services.
1/P represents the value of money measured in terms of goods and services.
when the money market is drawn with the value of money on the vertical axis, and increase in the money supply
increases the price level and decreases the value of money
Wealth is redistributed from debtors to creditors when inflation is
unexpectedly low
A decrease in expected inflation rate ____________ the nominal interest rate over the long term
decreases
