ECO 1302 Lecture Notes - Lecture 55: Monetarism, Monetary Policy

• School: University of Ottawa
• Department: Economics
• Course: ECO 1302
• Professor: Mario Seccareccia

Document Summary

Debate: the shape of the aggregate supply curve. Some economists claim that attempts at macroeconomic stabilization are likely to do more harm than good. Therefore, policy makers are best advised to follow fixed rules rather then their discretion on a case-by-case basis. By the end of the chapter you will be in a better position to make up your own mind on this important issue. Velo(cid:272)ity = (cid:374)u(cid:373)(cid:271)er of ti(cid:373)es per year that a(cid:374) (cid:862)average dollar(cid:863) is spe(cid:374)t o(cid:374) goods and services. V = nominal gdp money stock. Equation of exchange: m v = p y. The equation of exchange is simply an accounting identity. If v were constant, the equation would become a strict quantity theory of money. Implies that central bank can control nominal gdp. Figure 1: velocity of circulation of m1+ and m2+, 1968-2007. Velocity and the quantity theory of money.