Problem_Set_5_Wilson_Lisa

However if this is a permanent change the money

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long run, these effects will not be noticeable. However, if this is a permanent change, the money supply will increase, and output will be increased beyond its natural level. 2. How rapidly has the money supply (M1) grown during the past twelve months? State the rate of growth (use http://www.federalreserve.gov/releases/h6/ ) and the most recent release, use the seasonally adjusted figures. Calculate the rate of growth across the year by taking the (new amount of M1- old amount of M1)/old amount of M1). Given the state of the economy, should monetary authorities increase or decrease the growth rate of money? Explain why. The rate of growth over the past twelve months is .1078 or 10.78%. This was calculated as follows: (2463.2-2223.5) / 2223.5. I believe the monetary authorities should increase the growth rate of money due to unemployment levels remaining elevated, while still being able to manage inflation. 3. Is stability in the general level of prices through time important? Why or why not? Should price stability be the goal of monetary policy? Explain your responses. Yes, I believe stability in the general level of prices thoughout time is important. Buyer’s have more confidence and will spark more buying and investing. If consumers didn’t have confidence in prices, they will either save their money or possibly invest it in something concrete. Yes, I believe that price stability should be the goal of monetary policy.
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