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.3Essay

1)Explainwhytheuseofaninterestratetarget

ingstrategymayresultinprocyclical

monetarygrowth.

2)TheinterestratetargetingstrategyemployedbytheFedinthe1960sand1970sled

toprocyclicalmoneygrowth.True,false,oruncertain?Why?

3)Ifinflationandunemploymentareofdirectc

oncerntoFedofficials,whydothey

makesuchabigissueaboutmoneygrowtha

ndinterestrates?Whydonttheyjust

targettheunemploymentrateandtheinflatio

nratedirectly?Explain.

4)DescribethegoalsoftheFederalReserve.W

hathappenswhenthesegoalscome

intoconflict?Howwouldonedecideiflowerinflationismoreimportantthanlower

unemployment?Explain.

5)CantheFedcontrolthemoneysupply?Hasitdoneso?Whatevidencecanyou

providetosupportyouranswertoeachquestion?

6)Comparetheadvantagesanddisadvantageso

fmonetarytargetingandinflation

targeting.

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