I need help with some macro economics..?
I am really having trouble coping up with my macro economics. as i jumped a year. can anybody please explain me these simple terms.
nominal quantity of money..
income velocity of circulation of money
real income
nominal money balances
nominal money income
real money balances
Answer:
Nominal money, in economics, is the quantity of money measured in a particular currency and is directly proportional to the price level.
This means, among other things, that if the price level rises by 10%, people hold 10% more money than before. (ceteris paribus)
For example, if you hold $20 to buy pizza, and the price level increases by 10%, you essentially increase your money holding by $2, to a total of $22.
Real money is the quantity of money measured as a constant (eg: the value of the dollar in 1997), and relates to the above as follows:
Nominal money = Price level * Real money.
Hence Real Money = Nominal money/Price Level; the quantity of money measured in terms of what it will buy. Thus, your $22 at the new price level will buy you the same amount of goods and is the same quantity of real money as your $20 at the original price level.
Velocity of money works like this - The Fed releases new money into the economy. After it gets spent on something, it gets spent again by those who got it, and this goes on and on making it seem to economy like the Fed had released several times more money than it did. Then a multiplier is calculated depending on the effect on the economy. .
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nominal quantity of money..
income velocity of circulation of money
real income
nominal money balances
nominal money income
real money balances
Answer:
Nominal money, in economics, is the quantity of money measured in a particular currency and is directly proportional to the price level.
This means, among other things, that if the price level rises by 10%, people hold 10% more money than before. (ceteris paribus)
For example, if you hold $20 to buy pizza, and the price level increases by 10%, you essentially increase your money holding by $2, to a total of $22.
Real money is the quantity of money measured as a constant (eg: the value of the dollar in 1997), and relates to the above as follows:
Nominal money = Price level * Real money.
Hence Real Money = Nominal money/Price Level; the quantity of money measured in terms of what it will buy. Thus, your $22 at the new price level will buy you the same amount of goods and is the same quantity of real money as your $20 at the original price level.
Velocity of money works like this - The Fed releases new money into the economy. After it gets spent on something, it gets spent again by those who got it, and this goes on and on making it seem to economy like the Fed had released several times more money than it did. Then a multiplier is calculated depending on the effect on the economy. .
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