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Macroeconomics: A Contemporary Introduction
Chapter 16 Vocabulary
4
Economics
Undergraduate 1
04/18/2010
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Term
Demand for money
 Definition
the relationship between the interest rate and how much money people want to hold
Term
Equation of exchange
 Definition
the quantity of money, M, multiplied by its velocity, V, equals nominal GDP, which is the prodict of the price level, P, and real GDP, Y; or M(V) = P(Y)
Term
Velocity of money
 Definition
the average number of times per year each dollar is used to purchase final goods and services
Term
Quantity theory of money
 Definition
if the velocity of money is stable, or at least predictable, then changes in the money supply have predictable effects on the nominal GDP
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