Chapter 18

1. Why do people hold money?

2. What are the tools of monetary policy and how can the Federal Reserve apply these in a recessionary environment?

Chapter 10

1. Describe how is the CPI derived and what purpose does it serve?

2. What is the difference between the CPI and the GDP Deflator?

3. How does inflation affect society and who are the losers and gainers from inflation?

4. Define demand pull inflation and cost push inflation.

5. The salary of the president of the United States in 2000 was $400,000. In 1940, the president’s salary was $75,000. If the Consumer Price Index was 8.1 in 1940 and 100 in 2000, the 1940 presidential salary measured in terms of the purchasing power of the dollar in 2000 would be:


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