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From the CPI ( consumer price index) we can determine Inflation. according to Milton Friedman,inflation is always and everywhere in other words inflation occurs because there is too much money to buy the same goods so that can be control either increasing the production of that goods or by by reducing the money from the market There is a relation between total money supply and velocity of money
MV = PQ
- M stands for money.
- V stands for the velocity of money (or the rate at which people spend money).
- P stands for the general price level.
- Q stands for the quantity of goods and services produced.
Based on the above equation, holding the money velocity constant, if the money supply (M) increases at a faster rate than real economic output (Q), the price level (P) must increase to make up the difference.
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Interest rate spread, 10-15 year Treasury bonds option adjusted spread
Definition:The spread, or difference between long and short rates, is a simple measure of the slope of the yield curve. The series is constructed using the 10-year Treasury bond rate and the Federal funds rate, an overnight interbank borrowing rate, as reported by the Federal Reserve. It is felt to be an indicator of the stance of monetary policy and general financial conditions, because it rises (falls) when short rates are relatively low (high). When it becomes negative (i.e., short rates are higher than long rates, and the yield curve inverts), its record as an indicator of recessions is particularly strong.
Measured by: Federal Reserve
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