# Economic – Money and Banking

1. If the CPI basket in the base period cost \$3,000, consistent with the example in the lectures, what would that same basket cost in May of 1958?

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1. If a person was making \$40,000 in the base period, how much would they have to make during May of 1958 to have the same purchasing power as \$40,000 has in the base period?

1. Calculate the rate of inflation between May of 1958 and May of 1959 (show work).

1. Using the data on one year interest rates (https://research.stlouisfed.org/fred2/data/GS1.txt), calculate the ex-post real rate of interest between May of 1958 and May of 1959.

1. Calculate the ex-post real rate of interest from January 2012 to January 2013.

1. Calculate the ex-ante real rate of interest from January 2012 to January 2013. To do so, you need data on expected inflation (https://research.stlouisfed.org/fred2/data/MICH.txt). Note that all data on expected inflation is based on expectations for the next 12 months – for example, to make sure we are on same page, verify that the expected rate of inflation from January 2010 to January 2011 was 2.8%.

• (10 points) During the second quarter of 1958, calculate the GDP gap. To do so, you  need data on potential GDP (https://research.stlouisfed.org/fred2/data/GDPPOT.txt) and data on actual GDP (https://research.stlouisfed.org/fred2/data/GDPC1.txt).  The GDP gap is calculated by taking the actual value of GDP minus potential GDP divided by potential GDP times 100.  Also note the notation for quarters – for example: 2000 – 01 – 01 is the first quarter (Jan., Feb., March) of 2000 where 2000-10-01 is data for the fourth quarter of 2000 (Oct., Nov., Dec.). Calculator

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