Intro to Econ Week 11
Intro to Econ Week 11 Econ 201
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This 1 page Class Notes was uploaded by Katie Truppo on Saturday August 20, 2016. The Class Notes belongs to Econ 201 at University of Tennessee - Knoxville taught by Kenneth Baker in Fall 2015. Since its upload, it has received 4 views.
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Date Created: 08/20/16
Quantity Theory of Money Federal Reserve controls money supply and manipulate it, but it’s also related to inﬂation Velocity of Money: the rate at which money changes hands during a year V= (P x Y)/M p=aggregate price level y=real output m=money supply This is an identity and must hold true Quantity Equation: The Role of Money M x V=P x Y Rates of Change: %changeM x %changeV= %changeP x %changeY Any change on left side must be matched by equal change on right Neutrality of money: Even after inﬂation, money will eventually return to where it was before (wages/inﬂation)
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