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[Applying the equation of exchange] Go to the Web site of the Federal Reserve Bank of St. Louis (research. stlouisfed .org/fred2/) and find the most recent values and values from the same quarter 10 years earlier for the following three variables: (1) Real Gross Domestic Product (GDPC1), (2) the GDP Price Deflator (GDPDEF), and (3) the M2 Money Stock (M2SL).

a. Using these data, calculate the average annual rate of change in both real GDP and M2 over this 10-year period.

b. If we assume that velocity was constant during this period, what was the average annual inflation rate?

c. Using the GDP Price Deflator data, calculate the average annual inflation rate over this 10-year period.

d. Use your answers to parts (b) and (c) to discuss what must have happened to velocity during this period.

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M91748780

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