1.
Locate the Real Gross Domestic
Product (RGDP) graph from the Federal Reserve Bank of St. Louis FRED databases
(search within FRED).

a.
What is the base year for computing
the RGDP?

b.
What was US RGDP at the peak
before the Great Recession of 2008? (Hint:
Move your cursor along the graph line).

c.
When did the economy peak
before the recession? When was the
trough?

d.
When did GDP surpass the peak
before the Great Recession?

e.
What is the current RGDP (last
data point on the graph)?

2.
Although some economists expected
inflation to soar as a result of the Federal Reserve Banks easy money
policies in the wake of the Great Recession, inflation was actually very
low. Suppose an unexpected increase in
inflation does occur. Place an X in the
table indicating whether each entity is helped or hurt.

Entity

Helped

Hurt

Homeowners with fixed rate mortgages

US Federal Government

Unionized labor

Businesses

Lenders

3.
Define deflation. Briefly explain why economists believe
deflation is harmful to economic growth.

4.
Use the Bureau of Labor
Statistics Consumer Price Index History Table
(.bls.gov/cpi/tables.htm”>http://www.bls.gov/cpi/tables.htm)
to answer the following questions.
Note: There are many tables that
the BLS occasionally rearranges. You
need the annual percent changes from 1913.
This was table 24, but might change.

a.
Ford Motor Company produced the
first Mustang in 1964 which cost $2,368.
What is the equivalent price in current dollars? Show the computation.

b.
What was the longest sustained period
of price deflation since 1913 (7 years including 1 year of zero inflation)? What marcoeconomic event occurred in this
period? What was the greatest rate of
deflation during that time period?
c.
During what 3 year period did
the US experience the highest level of inflation? What was the highest yearly inflation rate
during that period?

5.
Obtain historical mortgage
rates from the Average 30 Year Fixed Mortgage Rates chart at Mortgage News
Daily (http://www.mortgagenewsdaily.com/data/30-year-mortgage-rates.aspx).

a.
What was the highest mortgage
rate since 1971? In what year?

b.
Compare the inflation rate from
the BLS tables to the mortgage rates. What
is the apparent relationship between inflation and nominal interest rates?

c.
From Marthinsen, write the
formula for the nominal interest rate?

1.
Locate the Real Gross Domestic
Product (RGDP) graph from the Federal Reserve Bank of St. Louis FRED databases
(search within FRED). a.
What is the base year for computing
the RGDP?b.
What was US RGDP at the peak
before the Great Recession of 2008? (Hint:
Move your cursor along the graph line).
c.
When did the economy peak
before the recession? When was the
trough?d.
When did GDP surpass the peak
before the Great Recession?e.
What is the current RGDP (last
data point on the graph)?2.
Although some economists expected
inflation to soar as a result of the Federal Reserve Banks easy money
policies in the wake of the Great Recession, inflation was actually very
low. Suppose an unexpected increase in
inflation does occur. Place an X in the
table indicating whether each entity is helped or hurt.EntityHelpedHurtHomeowners with fixed rate mortgagesUS Federal GovernmentUnionized laborBusinessesLenders3.
Define deflation. Briefly explain why economists believe
deflation is harmful to economic growth.4.
Use the Bureau of Labor
Statistics Consumer Price Index History Table
(.bls.gov/cpi/tables.htm”>http://www.bls.gov/cpi/tables.htm)
to answer the following questions.
Note: There are many tables that
the BLS occasionally rearranges. You
need the annual percent changes from 1913.
This was table 24, but might change.
a.
Ford Motor Company produced the
first Mustang in 1964 which cost $2,368.
What is the equivalent price in current dollars? Show the computation. b.
What was the longest sustained period
of price deflation since 1913 (7 years including 1 year of zero inflation)? What marcoeconomic event occurred in this
period? What was the greatest rate of
deflation during that time period?c.
During what 3 year period did
the US experience the highest level of inflation? What was the highest yearly inflation rate
during that period?5.
Obtain historical mortgage
rates from the Average 30 Year Fixed Mortgage Rates chart at Mortgage News
Daily (http://www.mortgagenewsdaily.com/data/30-year-mortgage-rates.aspx). a.
What was the highest mortgage
rate since 1971? In what year?b.
Compare the inflation rate from
the BLS tables to the mortgage rates. What
is the apparent relationship between inflation and nominal interest rates? c.
From Marthinsen, write the
formula for the nominal interest rate?