Has M2 always been a useful tool for forecasting inflation? Explain.
What will be an ideal response?
From 1960 to 1980 it seemed that growth of M2 was a good tool to forecast inflation, with a two-year lag; in fact the correlation was over 0.5. For the years 1990 to 2016 this does not seem to be the case, in fact the correlation was 0. There is no clear explanation for why the growth of M2 has ceased being a good forecast tool for inflation, but there are some ideas economists are researching.
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Suppose a union successfully negotiates a wage rate for its members that is above the competitive wage rate, then
A) employment in the union sector will increase. B) the union must find a way to make union workers more productive. C) the union must also negotiate a fringe-benefit package that the membership will like. D) the union must find a way to ration jobs among the excessive number of workers who wish to work at the negotiated wage.
The mangers of Healthy Snacks and Healthy Bars are engaged in a strategic interaction in which their interests are aligned, but there is more than one possible equilibrium. All of the following can help the managers determine the equilibrium outcome except which one?
A) an announcement by Healthy Snacks regarding their future plans, but not an announcement by Healthy Bars regarding their future plans B) the Pareto criterion C) an announcement made by either firm regarding their future plans D) a focal point