Go to the St. Louis Federal Reserve FRED database, and find data on the GDP deflator (GDPDEF) and the price of a barrel of oil (OILPRICE). For the GDP deflator, convert the Units setting to “Percent Change from Year Ago” and download the data.

a) Calculate the average percent change in the price of oil over the most recent 5 years of data available. To do this, calculate the percentage change from beginning to end, and divide this number by 5. What is the change in the inflation rate over the same time period?

b) Calculate the average percent change in the price of oil from January 1976 to January 1981. To do this, calculate the percentage change from beginning to end, and divide this number by 5.

What is the change in the inflation rate over the same time period?

c) Based on your answers to parts (a) and (b), what can you conclude about the credibility of current monetary policy compared to its credibility in the earlier period?