Macro Economics Chapter 16 Key Words Flashcards
demand for money curve
A curve representing the quantity of money that people hold at different possible interest rates, ceteris paribus.
equation of exchange
An accounting identity that states the money supply times the velocity of money equals total spending.
monetarism
The theory that changes in the money supply directly determine changes in prices, real GDP, and employment.
precautionary demand for money
The stock of money people hold to pay unpredictable expenses.
quantity theory of money
The theory that changes in the money supply are directly related to changes in the price level.
speculative demand for money
The stock of money people hold to take advantage of expected future changes in the price of bonds, stocks, or other nonmoney financial assets.
transactions demand for money
The stock of money people hold to pay everyday predictable expenses.
velocity of money
The average number of times per year a dollar of the money supply is spent on final goods and services.
