Read Ch. 3 of Rukstad and answer the following questions. Give two or three sentences to support your answers.

1. Was the background of Paul Volcker primarily academic, government or private business?

 

 

2. Where did Paul Volker’s impetus for the tightening of money growth come from—demands from workers, bankers, investors, regular U.S. citizens or U.S. politicians? (In other words, why did the central bankers in Belgrade have such an impact on him?)

 

 

3. What does "gradualism" refer to? (What is the alternative or what is contrasted with?)

 

 

4. What component of money growth did Paul Volcker have the greatest effect on—the part created by the Fed (money base: currency and vault cash) or the part created by private banks (that ends up as demand deposits, savings deposits, etc.)?

 

 

5. Besides Paul Volcker, what else caused interest rates to rise in the early 1980’s?

 

 

6. Was the Fed in favor or against the DIDMCA act of 1980?

 

 

7. Look at the graphs on pp. 86—86 and on p. 98. Which years saw the highest short-term interest rates and which saw the highest decline in production? Did the high output bid up the interest rates or did high interest rates bid down the output levels?

 

 

8. Look at the graph on page 93. Does the growth rate of M2 fall dramatically after 1979? Is it fair to say that after 1979, the growth rate, while volatile, rose, fell or remained roughly where it was? (Give general numbers.)