Economics Detective

1. In the United States, how many central banks are there? 2. In note 5, we mention a measure of the money supply called “M2.” There are other

measures of the money supply. For example, “M1” refers to currency and other assets that are immediately available for spending purposes. Find the most recent measure of the stocks of M1 and M2 for the United States.

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3. Calculate the velocity of money for a country other than the United States.

4. The chapter did not present data on other recent periods of high inflation in countries such as Argentina, Brazil, Israel, and others. Search the Internet to find data on the inflation experiences of these countries. Create a graph of the growth rates of inflation and money in one of these countries.

5. It might be that countries have high money growth and thus high inflation because these are the goals of their monetary authority. See whether you can find a monetary authority with a stated goal of high inflation. If not, then think about why countries experience inflation if that is not the objective of the monetary authority?

6. What countries are dollarized in the world economy? Try to find out how dollarization influenced the inflation rate in that country.

7. Try to find a statement of the objectives of the Central Bank of Argentina. Part of independence is the way in which the decision makers at the central bank are appointed. How are these appointments made in Argentina?

8. Go to the web page for the Bank of Australia to learn about inflation targeting. What is their inflation target? How is it determined? What happens if they miss the target? Compare this to the objective and policy decisions of the Fed in the United States. What other central banks follow an inflation-targeting rule?

9. Is monetary policy in the United States guided by an inflation target? Does the European Central Bank use an inflation target?