巴德 宏观经济学原理（英文版·第8版）Chapter 12 Eye Ons.pptxVIP

EYE OnsMoney, Interest,and Inflation11EYE ONS According to the quantity theory of money, whether we face a future with inflation, deflation, or a stable price level depends entirely on the rate at which the Fed permits the quantity of money to grow.But is the quantity theory correct?Does it explain our past inflation with enough accuracy to be a guide to future inflation? The quantity theory does not predict the year-to-year changes in the inflation rate.The quantity theory does an especially bad job of explaining 2008 and 2009 because in those years, the velocity of circulation tumbled.But on average, over a number of years, the quantity theory is a remarkably accurate predictor of the inflation rate.The figure (on the next slide) shows that the quantity theory explains our inflation rates since the 1960s. The 1960s and 1970sThe quantity theory does a perfect job of explaining inflation in these two decades.The inflation rate (green bar) equaled the M2 growth rate (blue bar) minus thereal GDP growth rate (red bar).Velocity of circulation of M2 was constant. During the 1970s the M2 growth rate increased, real GDP growth was slowed, and the inflation rate rose. The 1980s and 1990sDuring the1980s, M2 growth rate slowed,M2 velocity increased, and real GDP growth was steady. The inflation rate fell. EYE o the CAUSE OF INFLATIONDuring the 1990s,M2 growth slowed, M2 velocity increased, real GDP remained steady, and the inflation rate fell. EYE on the CAUE OF INFLATIONThe 2000s and 2010sIn these decades, the M2 growth rate increased but the inflation rate decreased. The changes in inflation are the opposite of what the quantity theory predicts. The reason is that the velocity of circulation fell (the yellow bars and down-arrows).Velocity fell because interest rates were lowered by the Fed to unprecedented levels.EYE on the CAUE OF INFLATION Today, 70 percent of U.