曼昆宏观经济学课件 (4)

P Y V M
P Y = value of output
CHAPTER 4
Money and Inflation
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The quantity equation
§ The quantity equation
M V = P Y follows from the preceding definition of velocity. it holds by definition of the variables.
CHAPTER 4
Money and Inflation
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Money supply measures, May 2009
symbol assets included C M1 Currency C + demand deposits, travelers’ checks, other checkable deposits M1 + small time deposits, savings deposits, money market mutual funds, money market deposit accounts
Money and Inflation
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§ The price level is
CHAPTER 4
The quantity theory of money, cont.
§ Recall from Chapter 2:
The growth rate of a product equals the sum of the growth rates.
§ With V constant, the money supply determines
nominal GDP (P Y ).
§ Real GDP is determined by the economy’s
supplies of K and L and the production function (Chap 3). P = (nominal GDP)/(real GDP).
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The quantity theory of money, cont.
(Greek letter “pi”)
The result from the preceding slide: Solve this result for :
denotes the inflation rate:
P P
SEVENTH EDITION
§ The classical theory of inflation § causes § effects § social costs § “Classical” – assumes prices are flexible &
markets clear
§ Applies to the long run
in 2009 § So, velocity = 5
CHAPTER 4
Money and Inflation
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Velocity, cont.
§ This suggests the following definition:
T V M
where V = velocity
T = value of all transactions M = money supply
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Money and Inflation
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Velocity, cont.
§ Use nominal GDP as a proxy for total
transactions. Then,
where P Y = price of output = quantity of output (GDP deflator) (real GDP) (nominal GDP)
§ unit of account
CHAPTER 4
Money and Inflation
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Money: Types
1. Fiat money
§ has no intrinsic value § example: the paper currency we use
2. Commodity money
§ Money growth in excess of this amount leads
CHAPTER 4
Money and Inflation
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The quantity theory of money, cont.
Y/Y depends on growth in the factors of production and on technological progress (all of which we take as given, for now). Hence, the Quantity Theory predicts a one-for-one relation between changes in the money growth rate and changes in the inflation rate.
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The central bank
§ Monetary policy is conducted by a country’s
central bank.
§ In the U.S.,
the central bank is called the Federal Reserve (“the Fed”).
The Federal ቤተ መጻሕፍቲ ባይዱeserve Building Washington, DC
a. Currency b. Checks c. Deposits in checking accounts
(“demand deposits”)
d. Credit cards e. Certificates of deposit
(“time deposits”)
The money supply and monetary policy definitions
M V P Y
§ The quantity equation in growth rates:
M

V

P

Y
The quantity theory of money assumes V V is constant, so = 0. V
CHAPTER 4
Money and Inflation
M P Y M P Y
CHAPTER 4
Money and Inflation
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The quantity theory of money, cont.
§ Normal economic growth requires a certain
amount of money supply growth to facilitate the growth in transactions. to inflation.
2010
The connection between money and prices § Inflation rate = the percentage increase
in the average level of prices. buy a good.
§ Price = amount of money required to § Because prices are defined in terms of money,
§ A simple money demand function:
(M/P )d = k Y where k = how much money people wish to hold for each dollar of income. (k is exogenous)
Money and Inflation
to their incomes (k is large), money changes hands infrequently (V is small).
CHAPTER 4
Money and Inflation
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Back to the quantity theory of money
§ starts with quantity equation § assumes V is constant & exogenous: V V
§ Begins with the concept of velocity…
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Money and Inflation
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Velocity
§ basic concept:
the rate at which money circulates dollar bill changes hands in a given time period
Money and Inflation
amount ($ billions) $850 $1596
M2
$8328
CHAPTER 4
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The Quantity Theory of Money
§ A simple theory linking the inflation rate to the
growth rate of the money supply.
Then, quantity equation becomes:
M V P Y
CHAPTER 4
Money and Inflation
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The quantity theory of money, cont.
M V P Y
How the price level is determined:
§ has intrinsic value § examples:
gold coins, cigarettes in P.O.W. camps
CHAPTER 4
Money and Inflation
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NOW YOU TRY:
Discussion Question
Which of these are money?
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CHAPTER 4
Money demand and the quantity equation
§ money demand:
(M/P )d = k Y
§ quantity equation: M V = P Y § The connection between them: k = 1/V § When people hold lots of money relative
we need to consider the nature of money, the supply of money, and how it is controlled.
CHAPTER 4
Money and Inflation
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Money: Definition
CHAPTER 4
Money and Inflation
§ It is an identity:
CHAPTER 4
Money and Inflation
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Money demand and the quantity equation
§ M/P = real money balances, the purchasing
power of the money supply.
§ The money supply is the quantity of money
available in the economy. supply.
§ Monetary policy is the control over the money
CHAPTER 4
Money and Inflation
Inflation and its trend,
15% 12% 9% 6% 3% 0% -3% 1960
1960-2009
% change in CPI from 12 months earlier long-run trend
1965
1970
1975
1980
1985
1990
1995
2000
2005
§ definition: the number of times the average
§ example: In 2009, § $500 billion in transactions § money supply = $100 billion § The average dollar is used in five transactions
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Money: Functions
§ medium of exchange
we use it to buy stuff
§ store of value
transfers purchasing power from the present to the future the common unit by which everyone measures prices and values