For each year shown in the table please calculate the implied velocity of money.
ID: 1106496 • Letter: F
Question
For each year shown in the table please calculate the implied velocity of money.
Do you expect to see a velocity measure that is constant over the long run?
Do you expect to see a velocity measure that is constant over the long run? Fully explain giving at least two fully articulated reasons.
Date1
M2
RealGDP - Y
PriceLevel - P
Nominal GDP
velocity
1960-01-01
299.4
3123.2
0.2
543.3
1970-01-01
587.6
4707.1
0.2
1053.5
1980-01-01
1489.9
6524.9
0.4
2796.5
1990-01-01
3177.4
8947.1
0.7
5890.8
2000-01-01
4669.8
12359.1
0.8
10031.0
2010-01-01
8481.8
14604.8
1.0
14681.1
2017-01-01
13332.7
16903.2
1.1
19057.7
The table below shows most of the components of the quantity theory of exchange. Th data are for the first quarter of each of the years indicated, the intent is to provide a long term perspective. M2 shows the money supply measure M2, the level of Real GDP, also labelled as Y is shown. A measure of the price level is shown, as in nominal GDP.For each year shown in the table please calculate the implied velocity of money.
Do you expect to see a velocity measure that is constant over the long run?
Do you expect to see a velocity measure that is constant over the long run? Fully explain giving at least two fully articulated reasons.
Date1
M2
RealGDP - Y
PriceLevel - P
Nominal GDP
velocity
1960-01-01
299.4
3123.2
0.2
543.3
1970-01-01
587.6
4707.1
0.2
1053.5
1980-01-01
1489.9
6524.9
0.4
2796.5
1990-01-01
3177.4
8947.1
0.7
5890.8
2000-01-01
4669.8
12359.1
0.8
10031.0
2010-01-01
8481.8
14604.8
1.0
14681.1
2017-01-01
13332.7
16903.2
1.1
19057.7
Explanation / Answer
Answer : Table showing information about calculation of money velocity :
Velocity of money = Nominal GDP/ Money supply
Velocity of money is constant over the long run in an economic scanerio because of various reason :
DATE VELOCITY 1960 1.81 1970 1.7928 1980 1.871 1990 1.85 2000 2.1480 2010 1.73 2017 1.42Related Questions
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