In 1984 and 1985, the small Latin American country of Bolivia experienced hyperinflation. Below are some key

Question:

In 1984 and 1985, the small Latin American country of Bolivia experienced hyperinflation. Below are some key macroeconomic data from those years:

a. Do the money supply, price level, and exchange rate against the U.S. dollar move broadly as you would expect? Explain.
b. Calculate the percent changes in the general price level and price of the dollar between April 1984 and July 1985. How do these compare to each other and to the percent increase in the money supply? Can you explain the results?
c. The Bolivian government introduced a dramatic stabilization plan near the end of August 1985. Looking at the price levels and exchange rates for the following two months, do you think it was successful? In light of your answer, explain why the money supply increased by a large amount between September and October 1985.

Exchange Rate
The value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars...