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Chapter 9: Q 17. (page 243)

Over the last century, during what periods were the

U.S. inflation rate highest and lowest?

Short Answer

Expert verified

There is more than one instance when this happens.

Step by step solution

01

Step 1. Definition

Inflation is the rate at which prices increase over a period of time. Inflation is a broad measure, such as the increase in prices or the increase in the cost of living in a country.

02

Step 2.

In 1970 inflation in the US was at its highest level. This is because of various reasons like central bank policy, Keynesian economic policy, the abandonment of the gold window, etc. all contributed to this.

And in 1930 inflation in the US was at its lowest. This is because of the reasons like because of feds policies and at that time most banks were unregulated and uninsured.

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Most popular questions from this chapter

Imagine that the government statisticians who calculate the inflation rate have been updating the basic basket of goods once every 10 years, but now they decide to update it every five years. How will this change affect the amount of substitution bias and quality/new goods bias?

22. Inflation rates, like most statistics, are imperfect

measures. Can you identify some ways that the inflation rate for fruit does not perfectly capture the rising price of fruit?

If a government gains from unexpected inflation when it borrows, why would it choose to offer indexed bonds?

A fixed-rate mortgage has the same interest rate over the life of the loan, whether the mortgage is for 15 or 30 years. By contrast, an adjustable-rate mortgage changes with market interest rates over the life of the mortgage. If inflation falls unexpectedly by 3%, what would likely happen to a homeowner with an adjustable-rate mortgage?

Do you think perfect indexing is possible? Why or why not?
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