Please, answer to the questions and give summary:

Inflation

Two price indices measuring inflation are personal consumption expenditure and consumer price index. Headline and core measures of inflation over the last three years are provided in Tables 6 and 7, and Charts 6 and 7.

1. Is it important to compare headline and core price indices? What does each one tell you?

2. Based on core PCE deflator data, what is the current inflation rate? Do you expect it to change? Why or why not?

3. What factors might affect the price level?

4. Why are the CPI and PCE price indices different? Which one does the Fed focus on when making monetary policy decisions? What is the Fed's target inflation rate?

Real Headline PCE: Change, Heal Core PCE less Food & Energy: Change, Monthly. SMR Bureau of Economic Analysis Bureau of Economic Analysis Percent Percent CHART 6: PERSONAL CONSUMPTION EXPENDITURES SOURCE: BUREAU OF ECONOMIC ANALYSIS 2 ST 12 1 IT 1 1. TO T | | | | 1 [ 3 15 - . -1 -1 -13 2 5 +Real Headline PCE: Change, Monthly, SAAR Bureau of Economic Analysis --Iel Core PCE fless Food & Enero Change, Monthly, SAAR Bureau of Economic Analysis 3 CHART 7: CONSUMER PRICE INDEX Headine CPL Change, Monthly, SA Bureau of Economic Anale Percent --Core CPE fless Food & Eng: Change, Monthly sa Bureau of Economic Analysis Percent = 1 | 4 | 3 3 3 131 3 ED E ED ED EO F 21 . | 1 ZO T to Y TO . TI . 1. 11 - 11 || . 11 | = . 7 YE * | WE YMS YING * 2013 CINTA 14 == *** 2 1 :: | * ** ZLATA ia 20 ED Real Headline PCE: Change, Heal Core PCE less Food & Energy: Change, Monthly. SMR Bureau of Economic Analysis Bureau of Economic Analysis Percent Percent CHART 6: PERSONAL CONSUMPTION EXPENDITURES SOURCE: BUREAU OF ECONOMIC ANALYSIS 2 ST 12 1 IT 1 1. TO T | | | | 1 [ 3 15 - . -1 -1 -13 2 5 +Real Headline PCE: Change, Monthly, SAAR Bureau of Economic Analysis --Iel Core PCE fless Food & Enero Change, Monthly, SAAR Bureau of Economic Analysis 3 CHART 7: CONSUMER PRICE INDEX Headine CPL Change, Monthly, SA Bureau of Economic Anale Percent --Core CPE fless Food & Eng: Change, Monthly sa Bureau of Economic Analysis Percent = 1 | 4 | 3 3 3 131 3 ED E ED ED EO F 21 . | 1 ZO T to Y TO . TI . 1. 11 - 11 || . 11 | = . 7 YE * | WE YMS YING * 2013 CINTA 14 == *** 2 1 :: | * ** ZLATA ia 20 ED