Match the following definitions with the correct terms or phrases: Question 1 options: Extremely high inflation. An equation that states that the nominal quantity of money multiplied by the velocity of money is equal to nominal GDP. The doctrine emphasizing that changes in the quantity of money lead to changes in nominal expenditure. Small costs associated with the act of changing prices. The principle by which changes in the money supply have no real effects on the economy in the long run and only result in a proportional change in the price level. Variables that are measured in current dollars, not adjusted for inflation. The cost of inflation from reducing real money balances, such as the inconvenience of needing make more frequent trips to the bank. The reduction in the value of money held by public caused by inflation. A system in which banks keep only some fraction of their deposits on reserve. A rising aggregate price level in the economy. An institution that oversees and regulates the banking system and conducts the monetary policy in Canada. The principle by which an increase in expected inflation drives up the nominal interest rate, leaving the expected real interest rate unchanged. A measure of how many times a unit of money is spent over the course of a year. A falling aggregate price level in the economy. A policy that involves changes in the quantity of money in circulation or in the interest rate, or both. The interest rate adjusted for inflation. The interest rate unadjusted for inflation. The theoretical separation of real and nominal variables in the classical model. Variables that are measured in constant dollars, adjusted for inflation. Increase in the dollar value of a financial investment in some period. 1. Bank of Canada 2. capital gain 3. classical dichotomy 4. deflation 5. Fisher Effect 6. fractional-reserve banking 7. hyperinflation 8. inflation 9. inflation tax 10. menu cost 11. monetary neutrality 12. monetary policy 13. nominal interest rate 14. nominal variables 15. quantity equation 16. quantity theory of money 17. real interest rate 18. real variables 19. shoeleather cost 20. velocity of money