1. Because inflation increased by only 1.7% in 2008, the American Association of Retired Persons comments that this is "an unfortunate side effect of inflation, since Social Security payments, which are indexed to inflation, will increase by only 1.7% in 2008." Comment on whether this is an "unfortunate side effect of inflation" or not.
2. The Federal Reserve Bank (Fed) can impact the economy through changes in the Federal funds rate, because changes in this interest rate will change all interest rates throughout the economy. The Federal funds rate was constant at 5.25% from 1996-1998, a time of falling inflation. What impact did this have on real interest rates during this time? What was likely to happen to investment spending?
3. "Traveling in Turkey is much cheaper now than it was 10 years ago," says a friend. "Ten years ago, a dollar bought 1,000 lira; this year, a dollar buys 1,500 lira." Total inflation over this period was 25% in the United States and 100% in Turkey. Is your friend right or wronghas it become more or less expensive to travel in Turkey?