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1. The Fed and Monetary Policy

Monetary policy is the action taken by the Federal Reserve to expand or contract the money supply and influence interest rates.

Question:

What are the Fed's target levels for the inflation rate and the unemployment rate?What are the inflation and unemployment rates today?As the top advisor to the chair of the Federal Reserve, define contractionary and expansionary monetary policies and explain which you advise the Fed to pursue today - given the inflation and unemployment targets versus the current rates.

2. Inflation - Winners and Losers

Weoften hear of inflation characterized as a bad thing, but Meyer describes both winners and losers from inflation.Give an example of one way in which you would win from unexpected inflation, and an example of one way in which you would lose from unexpected inflation.