Unformatted text preview: M2 = 9664.8 bil $; Base = 2603.6 bil $ Compute the ratio of M2 to money base. = 9664.8/2603.6 = 3.71 ( Money multiplier) Estimate the value of C urrency and compute C/M2 = 998/2603.6 = .38 ( currency ratio) 2) Estimate the value of GDP and calculate the ratio GDP/ M2 = 15176.1/9664.8 = 1.57 (Flow of output to money ratio) 3) Describe the trends of GDP and M2 a. Gdp grew annually from 4% to 20% b. M2 grew annually from 0% to 12.5% 4) Examine the difference in in growth between M2 and Real GDP. Observe M2 is growing faster than real GDP. On average, M2 grew about 2  3 % faster than real gdp. What does this difference mean for the economy? On average this will predict 23% inflation....
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This note was uploaded on 02/22/2012 for the course MANEC 453 taught by Professor Jerrynelson during the Winter '10 term at BYU.
 Winter '10
 JerryNelson

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