AP Economics Chapter 30 Flashcards

9338431735	quantity theory of money	a theory asserting that the quantity of money available determines the price level and that the growth rate in the quantity of money available determines the inflation rate.	0
9338431736	nominal variables	variables measured in monetary units.	1
9338431737	real variables	variables measured in physical units.	2
9338431738	classical dichotomy	the theoretical separation of nominal and real variables.	3
9338431739	monetary neutrality	the proposition that changes in the money supply do not affect real variables.	4
9338431740	velocity of money	the rate at which money changes hands.	5
9338431741	quantity equation	the equation M × V = P × Y, which relates the quantity of money, the velocity of money, and the dollar value of the economy's output of goods and services.	6
9338431742	inflation tax	the revenue the government raises by creating money.	7
9338431743	Fisher effect	the one-for-one adjustment of the nominal interest rate to the inflation rate.	8
9338431744	shoeleather costs	the resources wasted when inflation encourages people to reduce their money holdings.	9
9338431745	menu costs	the costs of changing prices.	10