A scatter plot can reveal a relationship between two indicators. Construct a scatter plot of annual data beginning in 1959 for inflation and money growth. Measure these as the percent change from a year ago of consumer prices (FRED code: CPIAUCSL) and M2 (FRED code: M2SL), respectively. Then, display a second scatter plot of annual data beginning in 1959 for inflation (measured as before) and the federal funds rate (FRED code: FEDFUNDS). Which indicator is more closely linked to inflation: money growth or the interest rate? Does that tell us which is the better policy instrument?
Answer to relevant QuestionsPlot the percentage change from a year ago of the velocity of money (FRED code: A14187USA163NNBR) between 1922 and 1939. Compare the typical scales of the velocity declines during the recessions of this “interwar” period ...Explain how and why the components of aggregate expenditure depend on the real interest rate. Be sure to distinguish between the real and nominal interest rates, and explain why the distinction matters. Economy A and Economy B are similar in every way except that in Economy A, 70percent of aggregate expenditure is sensitive to changes in the real interest rate and in economy B, only 50 percent of aggregate expenditure is ...You read a story in the newspaper blaming the central bank for pushing the economy into recession. The article goes on to mention that not only has output fallen below its potential level but that inflation had also risen. ...After examining Figure 22.6, explain the potential link between innovations in financial markets and output volatility since the 1980s. You should consider both the “Great Moderation” and the recession of 2007-2009 in ...
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