Go to the website of the Bureau of Economic Analysis (https://apps.bea.gov/iTable/?reqid=19&step=2&isuri=1&categories=survey Links to an external site.), choose “Section 1-Domestic Product and Income”. Open Table 1.1.5, modify the table and download the ANNUAL data from 1994 to 2012.
Now go to the website of Economic Report of the President (https://www.govinfo.gov/app/collection/erp/2022 Links to an external site.). Scroll down and open the excel workbook of Table B-40 (XLS). Download it.
Answer the following questions:
a) Create an excel workbook and use the workbook to create a graph showing the US economy’s velocity of money from 1994 to 2000. To calculate the velocity of money, use “M2” from Table B-40 as money supply and “Gross Domestic Product” from Table 1.1.5 as nominal income. On the vertical scale, set 2.5 as maximum value and 1 as minimum value. Copy and paste the graph you created into the main document you plan to submit or submit the excel workbook itself.
b) Use the excel workbook to create another graph showing the US economy’s velocity of money from 2006 to 2012. To calculate the velocity of money, use “M2” from Table B-40 as money supply and “Gross Domestic Product” from Table 1.1.5 as nominal income. On the vertical scale, set 2.5 as maximum value and 1 as minimum value. Copy and the paste the graph you created into the main document you plan to submit or submit the excel workbook itself.
c) Looking at the first graph you created, does the Quantity Theory of Money or the Keynesian Theory of Money Demand provide a better explanation of the observed velocity of money from 1994 to 2000? Briefly explain (type or write out your answer in the main document you plan to submit)
d) Looking at the second graph you created, does the Quantity Theory of Money or the Keynesian Theory of Money Demand provide a better explanation of the observed velocity of money from 2006 to 2012? Briefly explain (type or write out your answer in the main document you plan to submit)
