Suppose the Fed Sets an Inflation Target of 2% a Year

question 42

Multiple Choice

Suppose the Fed sets an inflation target of 2% a year. If economic growth averages 3% per year and velocity grows by 1% per year, by how much should it increase the money supply each year?

• A)2%
• B)4%
• C)5%
• D)6%

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Definitions:

Postpartum Depression

A complex mix of physical, emotional, and behavioral changes that happen in some women after giving birth, characterized by feelings of sadness, emptiness, or hopelessness.

Bipolar Depression

A mental health condition characterized by extreme mood swings including emotional highs (mania or hypomania) and lows (depression).

Couvade

A phenomenon where expectant fathers experience pregnancy symptoms like weight gain, nausea, and mood swings.

Moro Reflex

An involuntary reflex found in newborns, which is triggered by a sudden loss of support or loud sound, causing the baby to fling arms out sideways and then quickly pull them back.