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 announced an inflation target of 2% in early 2012.

f. The higher the inflation rate, the higher the effective tax rate on capital gains.

g. The Taylor rule describes how central banks adjust the growth rate of money across recessions and booms.

h. The only policy tools available to central banks are interest rates and the money stock.