Given the basic rule of thumb for the relationship among inflation, productivity and nominal wage increases, if wages rise by 2 percent and productivity increases 1 percent, one would predict inflation to be: (a) 0 percent.(b) 1 percent.(c) 1.5 percent.(d) 3 percent.

Explain whether each of the following events increases or decreases the money supply. a. the fed buys bonds in open-market operations. b. the fed reduces the reserve requirement. c. the fed increases the interest rate it pays on reserves. d. citibank repays a loan it had previously taken from the fed. e. after a rash of pickpocketing, people decide to hold less currency. f. fearful of bank runs, bankers decide to hold more excess reserves. g. the fomc increases its target for the federal funds rate.