| classical quantity theory | See quantity theory of money .
|
 |
|
|
| flight out of money | Tendency of people to hold goods rather than assets during
periods of high inflation.
|
|
|
|
| income elasticity | Amount that demand for real money balances changes, in
percentage terms, when income increases by 1 percent.
|
|
|
|
| income velocity of money | Ratio of income to the money stock.
|
|
|
|
| interest elasticity | Percentage change in the demand for real money balances
resulting from a 1 percent increase in the interest rate.
|
|
|
|
| liquid (assets) | Assets that can be easily and quickly converted into the unit of account (dollars in the United States). Easily used to make transactions.
|
|
|
|
| M1 | Currency plus checkable deposits.
|
|
|
|
| M2 | M 1 plus small time and savings deposits, overnight repurchase agreements (RPs) and eurodollars, and money market funds.
|
|
|
|
| medium of exchange | One of the roles of money; asset used to make payments.
|
|
|
|
| money | Assets that can be used for making immediate payment.
|
|
|
|
| money illusion | Belief that the numbers used to express prices have significance—that
changes in the nominal price of a good are meaningful in and of themselves.
|
|
|
|
| opportunity cost | What is forgone to take an action. For example, one opportunity cost of attending college is the lost wages the student could be earning in a full-time job.
|
|
|
|
| own rate of interest | The interest rate paid on money (often zero).
|
|
|
|
| portfolio | The mix of assets someone owns.
|
|
|
|
| precautionary motive | A reason people hold money; they do not know how much
they'll need to spend.
|
|
|
|
| quantity equation | Money times velocity equals price times quantity ( M Χ V = P Χ Y ).
|
|
|
|
| quantity theory of money | Theory of money demand emphasizing the relation of
nominal income to nominal money. Sometimes used to mean a vertical LM curve.
|
|
|
|
| real balances | Real value of the money stock (number of dollars divided by the price level).
|
|
|
|
| risky asset | Asset whose future payoff is uncertain.
|
|
|
|
| speculative motive | A reason people hold money; although the return on holding money is small, people hold it because it reduces the risk associated with their portfolio of assets.
|
|
|
|
| standard of deferred payment | Asset normally used for making payments due at a later date.
|
|
|
|
| store of value | Asset that maintains its value over time.
|
|
|
|
| transactions motive | A reason people hold money—they use it to purchase goods and services.
|
|
|
|
| unit of account | Asset in which prices are denoted.
|