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Copyright © 2006 Thomson Learning 30 Money Growth and Inflation
Figure 1 Money Supply, Money Demand, and the Equilibrium Price Level Copyright © 2004 South-Western Quantity of Money Value of Money, 1/ P Price Level, P Quantity fixed by the Fed Money supply 0 1 (Low) (High) (Low) 1 / 2 1 / 4 3 / Equilibrium value of money Equilibrium price level Money demand A
Figure 2 The Effects of Monetary Injection Copyright © 2004 South-Western Quantity of Money Value of Money, 1/ P Price Level, P Money demand 0 1 (Low) (High) (Low) 1 / 2 1 / 4 3 / M1M1 MS 1 M2M2 MS decreases the value of money and increases the price level. 1. An increase in the money supply... A B
Figure 3 Money and Prices During Four Hyperinflations Copyright © 2004 South-Western (a) Austria(b) Hungary Money supply Price level Index (Jan = 100) Index (July 1921 = 100) Price level 100,000 10,000 1, Money supply 100,000 10,000 1,
Figure 3 Money and Prices During Four Hyperinflations Copyright © 2004 South-Western (c) Germany 1 Index (Jan = 100) (d) Poland 100,000,000,000,000 1,000,000 10,000,000,000 1,000,000,000, ,000,000 10, Money supply Price level Price level Money supply Index (Jan = 100) ,000, ,000 1,000,000 10,000 1,
Figure 4 The UK Nominal Interest Rate and the Inflation Rate Copyright © 2004 South-Western
Table 1 How Inflation Raises the Tax Burden on Saving Copyright©2004 South-Western
Copyright © 2004 South-Western 30 Money Growth and Inflation.
Copyright © 2006 Thomson Learning 9 Application: International Trade.
7 TOPICS FOR FURTHER STUDY. Copyright © 2006 Thomson Learning 21 The Theory of Consumer Choice.
3 SUPPLY AND DEMAND II: MARKETS AND WELFARE. Copyright © 2006 Thomson Learning 7 Consumers, Producers, and the Efficiency of Markets.
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Slide 1 Copyright © 2004 Glenna R. Shaw & FTC Publishing Background Courtesy of Awesome BackgroundsAwesome BackgroundsCommunication! Macro Policy.
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INFLATION 28 CHAPTER. Objectives After studying this chapter, you will able to Distinguish between inflation and a one-time rise in the price level Explain.
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© 2010 Pearson Addison-Wesley CHAPTER 1. © 2010 Pearson Addison-Wesley.
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