Principles of Macroeconomics / Unit 12 MAC 1132 short lesson, about 20 seconds
The Quantity Theory in the Long Run
Captions available
The idea
In growth rates, money growth plus velocity growth equals inflation plus output growth. With velocity stable over long periods and output at potential, inflation equals money growth minus potential output growth.
In practice
This is unit ten's long-run result, now derived rather than asserted.
Where people slip
The relationship holds best where inflation is high, and loosely below ten percent.
Your place on the trail
Every lesson rests on earlier ones and opens later ones. Tap any to jump.
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