Economics 011

1. Chapter 12 of your textbook discusses the relationship between growth in the money supply and inflation. Figure 12.4 shows graphs of price level and money supply, and money growth and the inflation rate for Peru during the years 1980-1995. Your assignment is to collect twenty years or more worth of data on those variables for another country, and construct graphs like those in Figure 12.4 using your data. You can do this in Excel. Use International Financial Statistics of the International Monetary Fund to find the data. (Link from here: https://www.imf.org/en/data ) Are your graphs consistent with the view that monetary growth and the inflation rate are closely related? Discuss.
2. Research and discuss a contemporary or historical example of a country with a very high inflation rate. What are the data? Find 2 or 3 reputable sources that discuss your example. Check with me if you doubt whether or not your sources are reputable. What does your research suggest were the root causes of the episode of high inflation that you studied? What were the costs associated with such high inflation? What happened to real GDP growth (not nominal, but real)? What happened to real investment and savings (not nominal, but real)?
3. There has been concern over the potential for an increase in the inflation rate in the U.S. Read the following post by former Obama Administration economic advisor Larry Summers: http://larrysummers.com/2021/05/24/the-inflation-risk-is-real/ . Also read the most recent press release on inflation from the Bureau of Labor Statistics of the US Department of Labor: https://www.bls.gov/news.release/cpi.nr0.htm . Read some of the reporting in the press (Wall Street Journal, New York Times, Economist magazine, Financial Times, or elsewhere) on last week’s BLS report on inflation. Summarize the basis for the concern over rising inflation: Why might prices start rising at an accelerated rate, and what is the evidence to date that they are?

Last Completed Projects