Inside Money Example
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Checking account, bank owes you that money and you can use a debit card
to make a payment.
Supply of Money
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is the difference between all above-ground gold (G) and the stock of non-
monetary gold.
,Calculate continuously-Compounding Annual Rate of Inflation
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π = [ln(Pt) - ln(Pj)]/n
Pt - more recent year
Pj - prior year
n- number of years between t & j
Increase in long run marginal cost of producing gold coins (c)
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Immediately: no change in quantity of coins or PPM.
Eventually, supply adjusts:
Quantity of coins decreases
PPM increases
Historical Materialist View
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(Anthropologist favor) money is a revenue-raising technology introduced
by governments to collect taxes more effectively.
Calculate Simple Inflation Rate
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, π = (Pt+1 - Pt)/Pt
Pt+1 - new base year
Pt - old base year
Increase in money demand (Dm)
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Immediately:
PPM increases
Quantity of coins increases
Eventually, supply adjusts:
Quantity of coins increases
PPM returns to initial level
Purchasing power volatility
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The price level was more volatile on the market-managed gold standard
than the central bank-managed fiat standard.
Increase in non-monetary demand (G)
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Supply decreases, with no initial change in G.
Immediately:
Quantity of coins decreases
PPM increases
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Checking account, bank owes you that money and you can use a debit card
to make a payment.
Supply of Money
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is the difference between all above-ground gold (G) and the stock of non-
monetary gold.
,Calculate continuously-Compounding Annual Rate of Inflation
Give this one a try later!
π = [ln(Pt) - ln(Pj)]/n
Pt - more recent year
Pj - prior year
n- number of years between t & j
Increase in long run marginal cost of producing gold coins (c)
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Immediately: no change in quantity of coins or PPM.
Eventually, supply adjusts:
Quantity of coins decreases
PPM increases
Historical Materialist View
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(Anthropologist favor) money is a revenue-raising technology introduced
by governments to collect taxes more effectively.
Calculate Simple Inflation Rate
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, π = (Pt+1 - Pt)/Pt
Pt+1 - new base year
Pt - old base year
Increase in money demand (Dm)
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Immediately:
PPM increases
Quantity of coins increases
Eventually, supply adjusts:
Quantity of coins increases
PPM returns to initial level
Purchasing power volatility
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The price level was more volatile on the market-managed gold standard
than the central bank-managed fiat standard.
Increase in non-monetary demand (G)
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Supply decreases, with no initial change in G.
Immediately:
Quantity of coins decreases
PPM increases
