Fun at the FED!

The FED uses a bunch of different data to develop its monetary policy. Open a new document in Microsoft Word and title it "Fun at the FED!" and we'll explore some of this data.

Please go to the New York Fed and click on "Research" and "National Economy .” Now click on “Economic Indicators Pages.”

 

First, look at "Real GDP" chart on the PDF document "U.S. Aggregate Demand and Industrial Production."

[Note that the chart is showing percentage change from the previous quarter. So the drop from the 2nd quarter of 1996 to the 3rd quarter of 1996 is not a decrease in GDP but a decrease in the rate of growth of GDP. Click here to learn more about how to read this chart.]

  1. The traditional definition of a recession is two or more consecutive quarters of declining GDP. If we accept that definition, how many recessions have we had since 1990?

  2. In what quarter of what year did the most recent recession begin?

  3. In what quarter of what year did the most recent recession end?

  4. Are we in a recession now?

  5. Can you think of anything that might have caused the dip in GDP in the 3rd quarter of 2001?
     

Then, look at CPI Inflation. [CPI stands for the Consumer Price Index.]

  1. What effect did the recent recession have on consumer prices?

  2. Skip #s 7-9 on your Word document please.

Now, look at Money Growth Rates: M1, M2, and M3. Look at the M2 chart, specifically the blue line showing changes in the level of the money supply from a year earlier.

  1. Before interpreting the chart, copy and paste the definition of M2 found here into your Word document.

  2. What was the FED doing with the money supply to try to counteract the recent recession?

  3. What has the FED been doing with M2 more recently?

  4. What is the FED's goal when it reduces the money supply?

Now switch to home page of the FED site.

  1. What is the currently targeted federal funds rate?

  2. Speaking of Federal Funds Rate, find a definition of it and paste it in as answer #15.

Now go to the Minneapolis FED's "CPI Calculator."

  1. Figure out how many dollars it would take today (or the most recent year that the calendar will display) to equal $100 in the year you were born. Write this down, together with the year of your birth.

Go to MovieWeb's Top 100 All Time Highest Grossing Movies page. [If this is blocked, go here instead.]

  1. Using the CPI Index Calculator at the Minneapolis FED's site, compare each of the six movies in the Star Wars saga. After adjusting for inflation (using the date of original release as the basis for the calculations), which of the movies had the highest adjusted-for-inflation gross?

  2. And which the lowest?

The end!