Macroeconomics 5th Edition by Olivier Blanchard

Exercise 7

Using the information in this chapter, label each of the following statements true, false, or uncertain. Explain briefly.
a. The most important argument in favor of a positive rate of inflation in OECD countries is seignorage. b. The Fed should target M2 growth because it moves quite closely with inflation.
c. Fighting inflation should be the Fed's only purpose.
d. Because most people have little trouble distinguishing between nominal and real values, inflation does not distort decision making.
e. The Fed uses reserve requirements as its primary instrument of monetary policy.
f. The higher the inflation rate, the higher the effective tax rate on capital gains.