Chapter 12 Flashcards
1
Q
Monetary transmission mechanism
A
The process by which changes in the money supply influence the amount households and firms wish to spend on goods and services.
2
Q
Pigou effect
A
The increase in consumer spending that results when a fall in the price level raises real money balances and, thereby, consumers’ wealth.
3
Q
Debt-deflation theory
A
A theory according to which an unexpected fall in the price level redistributes real wealth from debtors to creditors and, therefore reduces total spending in the economy.
