Questions

Explain the four money aggregates discussed in class today. How are they related to each other in terms of liquidity? If I take money from a checkable deposit account to a super NOW account, how does M1 change? How does M2 change?

What is the quantity equation, and how was it transformed into the quantity theory of money? Define the quantity theory of money. Why is it considered to be important for the theory that velocity is constant? How did Irving Fisher argue that velocity was constant?

Read this Niall Ferguson article on Milton Friedman and the significance of his aphorism, "Money is always and everywhere a monetary phenomenon."

Define seigniorage. Who receives it? How much of the U.S. federal government is financed in this manner, compared to (say) Italy and Greece? (See p. 90 of the Mankiw text.) How does this practice result in an inflation tax?

What group of consumers in an economy benefit from inflation?