Homework 2.docx - Homework 2 1 A B C Average annual growth rate i M2 9666.338217 ii CPI 220.6884142 iii GDP 16384.64014 D(Gm-Gy= π a

Homework 2.docx - Homework 2 1 A B C Average annual growth...

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Homework 2 1) A) B) C) Average annual growth rate i. M2: 9666.338217 ii. CPI: 220.6884142 iii. GDP: 16384.64014 D) (Gm-Gy= π) a. 9666.338-13606.369= -3940.031 E) There seems to be a classical dichotomy, in which there is a theoretical separation between real and nominal quantities as discussed in lecture. This isn’t good in the short run because prices are relatively “sticky” in the short run.
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2) Reading a. The three conclusions are: i. “In the long run, there is a high (almost unity) correlation between the rate of growth of the money supply and the rate of inflation. This holds across three definitions of money and across the full sample of countries and two subsamples.” (page 4) ii. “In the long run, there is no correlation between the growth rates of money
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