flexible prices, New Keynesians, price level, purchasing power, sticky prices

Few people would, I think, take exception to the claim that, in a well-functioning monetary system, the quantity of money supplied should seldom differ, and should never differ very much, from the quantity demanded.  What's controversial isn't that claim itself, but the suggestion that it supplies a…

deflation, inflation, price level, productivity, velocity of money

Changes in the general level of prices are capable, as we've seen, of eliminating shortages or surpluses of money, by adding to or subtracting from the purchasing power of existing money holdings.  But because such changes place an extra burden on the price system, increasing the likelihood…

monetary base, money supply, Open Market Operations, repos, reverse repos

In previous installments of this primer I've tried to convince you, first, that monetary policy is ultimately about keeping the available quantity of money from differing substantially, if only temporarily, from the quantity demanded and, second, that doing this boils down in practice to having a money…