View the step-by-step solution to:


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series code M2 Link:

FRED Velocity of the M2 money stock Link:

FRED series code GDP Link:

Ignore question 4 for more details on FRED, it's not needed.

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1. The velocity of money in the data a. Use FRED data to generate a graph which shows information on the growth rates of the
following three variables from 1980 to the present. (By ‘growth rate’ we mean
‘percentage change from a year ago.’). See question 4 for more details on FRED. i. The M2 money stock (FRED series code: M2)
ii. The velocity of the M2 money stock. (FRED series code: M21V)
iii. Nominal GDP (FRED series code: GDP).
Print out your graph and include it as part of your answer. b. Calculate the growth rates from 2007 to today by hand and show your work. c. What usually happens to the other two variables in your graph in years in which M2
growth is higher than usual? Is this consistent with the quantity theory of money?
Explain your answer. (1. For someone expecting velocity to remain constant throughout and after the great
recession, in which direction would they have expected inflation to go? Why were they

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