ECO 1102 Lecture Notes - Lecture 15: Price Level, Openmarket, Deflation

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ECO 1102 Full Course Notes
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ECO 1102 Full Course Notes
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Chapter 11: part 1 money growth and inflation. Inflation: increase in the overall level of prices. Deflation: fall in the overall level of prices. Try to understand inflation with the quantity theory of money. Often called classical because it was developed by some of the earliest thinkers about economic issues. The level of prices and the value of money. The economy"s overall price level can be viewed in (cid:884) ways: as the price of a basket of goods and services, as a measure of the value of money. It decreases, so the value of money rises. It decreases, and so the price level falls. Eg: in the 14th century, the african emperor travels to cairo where he gave away much gold, which as in use as a medium of exchange. Raise the price level, but decreases the value of gold in cairo. The value of money is determined by the supply and demand for money.

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