Question

Real-Time Data Analysis Exercise*

*Real-time data provided by Federal Reserve Economic Data (FRED), Federal Reserve Bank of Saint Louis.
Using data from the St. Louis Federal Reserve, analyze the relationship between changes in M2 and inflation.
M2SL is the Series ID for the M2 money supply.
CPIAUCSL is the Series ID for the Consumer Price Index.
Click the following link to view the M2 money supply data from FRED
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Using the Series IDs M2SL and CPIAUCSL, plot the annual percent change in M2 and annual inflation from 1960 to the present.
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The change in the M2 money supply for 2020 (shown as 2020-01-01 in FRED) %. (Round your response to two decimal places.)
The inflation rate for 2015 (shown as 2015-01-01 in FRED) was your response to two decimal places.)

Answer 1

To analyze the relationship between changes in M2 and inflation, you can plot their annual percent changes over a period of time. From the graph, you can observe the relationship between changes in M2 and inflation. To find the percentage change in the M2 money supply for 2020 and the inflation rate for 2015, you will need to compare the values at the beginning and end of the respective years.

Step-by-step explanation:

The M2 money supply and inflation are two important economic indicators that are often analyzed to understand the state of an economy. M2 measures the total amount of money in circulation in an economy, which includes cash, checking accounts, savings accounts, and other liquid assets. Inflation, on the other hand, measures the rate at which the general level of prices for goods and services is rising and eroding the purchasing power of money.

Analyzing the Relationship

To analyze the relationship between changes in M2 and inflation, we can look at their annual percent changes over a period of time. By plotting these changes on a graph, we can visually examine any patterns or trends that may exist.

Findings

Looking at the provided data from 1960 to the present, you can plot the annual percent change in M2 and annual inflation. From this graph, you can observe the relationship between changes in M2 and inflation.

Answering the Questions

To find the percentage change in the M2 money supply for 2020, find the difference between the M2 value at the beginning and the end of the year. Divide this difference by the M2 value at the beginning of the year, and multiply by 100 to get the percentage change. Round your response to two decimal places.

To find the inflation rate for 2015, locate the Consumer Price Index (CPI) value at the beginning and the end of the year. Divide the difference between these values by the CPI value at the beginning of the year, and multiply by 100 to get the inflation rate. Round your response to two decimal places.