Which is potentially the most powerful tool available to the Fed to control the supply of money?

An inflation forecast developed in a Monetarist framework is likely to focus on

A) Federal Reserve policy. B) interest rate movements. C) household and business spending decisions. D) the velocity of money.

What will tend to happen to wages if workers and employers foresee inflation?

a. Both parties will seek to reduce nominal wages and therefore keep real wages the same. b. Nominal wages will remain constant but real wages will increase to avoid the effects of inflation. c. Inflation erodes purchasing power of workers, and real wages are unchanged. d. Nominal wages will increase by an amount that keeps real wages constant.