Go to the St. Louis Federal Reserve FRED database, and find data on the M1 Money Stock (M1SL), M1 Money Velocity (M1V), and Real GDP (GDPC1). Convert the M1SL data series to "quarterly" using the frequency setting, and for all three series, use the "Percent Change from Year Ago" setting for units.
a. Calculate the average percentage change in real GDP, the M1 money stock, and velocity since 2000:Q1.
b. Based on your answer to part (a), calculate the average inflation rate since 2000 as predicted by the quantity theory of money.
c. Next, find the data on the GDP deflator price index (GDPDEF), download the data using the 'Percent Change from Year Ago' setting, and calculate the average inflation rate since 2000:Q1. Comment on the value relative to your answer in part (b).