Key fed tool federal funds interest rates FOMC sets this 5 rn What banks charge

Key fed tool federal funds interest rates fomc sets

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Key fed tool- federal funds interest rates (FOMC sets this) .5 rn What banks charge each other for overnight loans A “wholesale” interest rate It in turn influences other interest rates Notes on Jan 31
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Question= The year that had the highest prices also had the highest inflation rate?
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Helps answer the previous question ^^^^^ GDP Deflator is blue about 112% today and the inflation is red around 1.3%. High red inflation means prices are rising rapidly during that time period GDP deflator and Production since 1970 Question - which most accurately reflects the U.S. economy since 1970: Production ______ rises and prices ___ rise. Usually, always Deflation is a fall in prices Disinflation is less inflation Question: In these data (deflator), the U.S. __ had deflation and ___ had disinflation in this chart (the same one of this page) Has not, has Question: How do we measure inflation for the entire economy? GDP Deflator= (nominal/real)100 It is a price index that measures the “price level” (versus its
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base year) Inflation is the percent change in a price index PART E The consumer price index Question - On average, parents of Penn State students earn above $100,000. Say that in 2047 you earn $200,000. Is this enough to say that in a material sense that you’ll be better off than them? No. You need more information CPI can be used to remove inflation from nominal prices and wages Def: nominal (money) price or wage- how many dollars it takes to buy something or hire someone Def: Real price or wage- nominal value with inflation explicitly removed Question- What would be different in your calculation in Step 2 compared to Step 1 in your worksheet? Prices Question- CPI is best thought of as Not in dollars- dollars cancel out A measure of prices versus a base year- answer CPI Is the ratio of the price of a market basket of goods & services for the typical consumer in one month compared to the (arbitrary) base period*100 It measures price level for consumers Base period: 1982-84 (CPI=100) Actual CPI weights of market basket items Food & Beverages 15.3% Housing- rent 24.0% Housing- mortgage 17.1% Apparel 3.6% Transportation 16.9% Med care 7.1% Recreation 6% Edu/Comm 6.8% Other goods & service 3.4% Feb 2 CPI 2015= 238.0 CPI 2016=243.0
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So you can say that consumer prices rose since the base period which is in the early 80s (100 back then). Prices are two and a half times as high. Inflation rate of this aka the percent change in the CPI new-old/old * 100 2.1% over the last year. The fed is meeting its goal since their goal is 2% inflation a year. The other part of mandate is maximum employment and low unemployment Current CPI is 243 which is at the top Question : consumers __ see deflation since 1970 while the economy as a whole ____/ Deflation for consumers- or price index- if you look at the graph you don’t see a huge period of price decrease, but during the great recession it did fall. But measuring the economy as a whole, you would use the GDP deflator
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