Ec10b Spring 2015 Pset 4

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HARVARD UNIVERSITY

                       DEPARTMENT OF ECONOMICS

ECONOMICS 10b SPRING 2015

                             Problem Set #4

                  (due IN SECTION on Friday, March 27th)
  1. Federal Reserve Chair Janet Yellen has hinted that a long run inflation rate target

    of 2% is the guide she uses for monetary policy in the long run.

    Appealing to the Quantity Theory of Money, Rep. Doro Green advises Chair

    Yellen to therefore set a money growth rate target of 2% to achieve this long run

    inflation goal.

    If the Chair takes the Representatives advice, will she achieve her long run

    inflation goal? Why or why not?

    Why might we have reason to believe...

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