3. There is a group of economists who argue that the US should return to what’s called a “gold standard”. According to this policy approach, the dollar price of gold is always kept the same, so that we can think of the prices of goods and services as really being denominated in ounces of gold. In this problem, you’ll do a simple calculation that suggests possible problems with this approach. a. Using FRED, calculate how much the dollar price of an ounce of gold rose (in percentage terms) from December 2007 to December 2010. b. Using FRED, calculate how much the Consumer Price Index (CPI) rose (in percentage terms) from December 2007 to December 2010. c. How did the price of the CPI bundle of US goods and services, expressed in terms of ounces of gold, rise or fall (in percentage terms) from December 2007 to December 2010? d. Suppose that the US had been on the gold standard from December 2007 to December 2010, so that prices of goods and services were denominated in terms of ounces of gold. Using your answer in part (c), explain how much the CPI would have risen or fallen from December 2007 to December 2010. e. How would the change in the Consumer Price Index in part (d) have affected wages, and the ability of borrowers to make their (fixed) mortgage payments?
3. There is a group of economists who argue that the US should return to what’s called a “gold standard”. According to this policy approach, the dollar
a. Using FRED, calculate how much the dollar price of an ounce of gold rose (in percentage terms) from December 2007 to December 2010.
b. Using FRED, calculate how much the
c. How did the price of the CPI bundle of US goods and services, expressed in terms of ounces of gold, rise or fall (in percentage terms) from December 2007 to December 2010?
d. Suppose that the US had been on the gold standard from December 2007 to December 2010, so that prices of goods and services were denominated in terms of ounces of gold. Using your answer in part (c), explain how much the CPI would have risen or fallen from December 2007 to December 2010.
e. How would the change in the Consumer Price Index in part (d) have affected wages, and the ability of borrowers to make their (fixed) mortgage payments?
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