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Unformatted text preview: DEPARTMENT OF ECONOMICS UNIVERSITY OF CALIFORNIA, BERKELEY FALL 2009 ECON 182 Problem Set 4 Due in class on Thursday, October 1 at the beginning of lecture . Students that show their work and write neatly will be graded favorably. Please write your full name , GSI, and section time on your problem set. 1 Money and Inflation: Always and Everywhere Related? Get your hands dirty. This question asks you to collect some data. (1) Go to the website and get access to Federal Reserve Eco- nomic Data (FRED). Download the series of M0 (series ID: BASE), M1 (series ID: M1), M2 (series ID: M2) and CPI (series ID: CPIAUCNS). (2) How did money multipliers change between June 2008 and June 2009? Check your answer with the data series MULT. (3) Using the data, calculate the growth rates in money supply (M0, M1 and M2) during this period. What does this imply for inflation according to the Quantity Theory of Money? (4) Compare money supply growth to inflation numbers over the same period and briefly com- ment. 2 Fiscal Policy, Sovereign Debt Risk and the Exchange Rate In a recent issue of The Economist , it is said that [i]n the short term public largesse is a necessary response to the slump in private demand ( The other exit strategy ). However, [i]f bond markets become concerned that governments could default or inflate away their debts, interest rates would jump, choking off recovery ( Bind games )....
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This note was uploaded on 02/07/2010 for the course ECON 182 taught by Professor Kasa during the Spring '08 term at University of California, Berkeley.

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