Chapter 30

Chapter 30 focuses on talks about money growth and inflation. It discusses classical theory that was developed by early thinkers along with the quantity theory of money, which is a theory that states that the quantity of money available determines the price level and that the growth rate in that quantity of money determines the inflation rate. The chapter also shows the supply and demand for money and that the money supply is fixed because of the federal reserve, making it a vertical line on the graph. The demand is a downward decreasing curve, showing that when there is too much supply then the demand for money and the value of it goes down. Also the price level increases when this happens. Then the chapter talks about classical dichotomy which is the separation of nominal and real variables. A nominal variable is a variable measured in monetary units, while a real variable is a variable measured in physical units. Then it talks about how changes in money supply don't affect the real variables. The chapter also talks about the velocity of money and how it is the rate in which money changes hands. It can be calculated by multiplying the price level and the quantity of output, and then dividing by the quantity of money. The rest of the chapter talks about the inflation tax, the fisher effect, and the shoeleather and menu cost.Then it finishes of with a freesilver debate that includes the wizard of oz.