Question 1Consider the charts below. Discuss them carefully and explain how the empiricalrelationship between M1 growth and inflation in the charts relates to the theoreticalrelationship between money and inflation? Is the empirical relationship consistentwith the theoretical relationship? If so, how so? If not, why not?United Statesmaleford wordband!20-151003025201510500961-10-151965-1970-1975-1960196519701980-1985-1975-| 19901995M1 growth-Inflation1980-19852000-2005-2010-0661Infs Landly1995Australia20002005-402010-3020100-10-30252015196010519701960M1 growth19651970-InflationSwitzerland20052010Canada2010-M1 growth-Inflation-M1 growth - InflationNote: Money growth is measured by the growth rate of M1. Inflation is measured by the growth rate of the consumer price index.Source: OECD Economic Outlook, OECD, 19 April 2012, http://www.oecd-ilibrary.org/statistics.

As per the theory the growth of money supply and inflation moves in the same direction. Which means…

Question 1 Consider the charts below. Discuss them carefully and explain how the empirical relationship between M1 growth and inflation in the charts relates to the theoretical relationship between money and inflation? Is the empirical relationship consistent with the theoretical relationship? If so, how so? If not, why not? 201 15 10 5 0 30 25 20 15 5 0961 -15 1960 1965 1970- 1975- 1980- 1985- 1990- 1995- United States 1965 1970- الله الله الله ال 2000- 2005- 2010- -M1 growth-Inflation Australia 40 2000- 2005- 2010- 30- 20- Sandrarifs Land 10- 0- -10- 30 25- 1960 20- 15 10 5 0 1965 1970 1975 1980- 1985 1990- 1995 -M1 growth-Inflation 2000 1960 1965- 1970- 1975 1980- 1985 Switzerland Whyn 0661 2005 2010 Canada ww 1995 2000- 2005 2010- M1 growth-Inflation -M1 growth-Inflation Note: Money growth is measured by the growth rate of M1. Inflation is measured by the growth rate of the consumer price index. Source: OECD Economic Outlook, OECD, 19 April 2012, http://www.oecd-ilibrary.org/statistics.

Question 1 Consider the charts below. Discuss them carefully and explain how the empirical relationship between M1 growth and inflation in the charts relates to the theoretical relationship between money and inflation? Is the empirical relationship consistent with the theoretical relationship? If so, how so? If not, why not? 201 15 10 5 0 30 25 20 15 5 0961 -15 1960 1965 1970- 1975- 1980- 1985- 1990- 1995- United States 1965 1970- الله الله الله ال 2000- 2005- 2010- -M1 growth-Inflation Australia 40 2000- 2005- 2010- 30- 20- Sandrarifs Land 10- 0- -10- 30 25- 1960 20- 15 10 5 0 1965 1970 1975 1980- 1985 1990- 1995 -M1 growth-Inflation 2000 1960 1965- 1970- 1975 1980- 1985 Switzerland Whyn 0661 2005 2010 Canada ww 1995 2000- 2005 2010- M1 growth-Inflation -M1 growth-Inflation Note: Money growth is measured by the growth rate of M1. Inflation is measured by the growth rate of the consumer price index. Source: OECD Economic Outlook, OECD, 19 April 2012, http://www.oecd-ilibrary.org/statistics.

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter27: Issues In Macroeconomic Theory And Policy

Section: Chapter Questions

Problem 6P

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