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Forecast for real growth-inflation and imterest rates

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Question: As a manager, the following facts are in your possession at the end of ‘‘this'' year and you are asked to predict the changes in the economy ‘‘next'' year.

(A) The Fed has just cut the funds rate by 3/4%, but bond yields have been virtually unchanged.

(B) The stock market has just fallen 20% over the past three months.

(C) The Federal budget is now in surplus, and the surplus is expected to be bigger next year.

(D) The value of the dollar has risen by 20% over the past two years.

(E) Crude oil prices have fallen 30% over the past year.

(F) Money supply growth has been stable at 6%.

(G) Real growth this year was just over 4%. What is your forecast for real growth, inflation, and interest rates?

Reference no: EM131737830

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Use the stock market as a leading indicator : From September 2000 to March 2001, the S&P 500 index fell 27% and the US economy headed into a recession. From March 2002 to July 2002, the index fell another.
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