7. Between 1980 and 2005, Ghana experienced some periods of high inflation and periods of less high inflation. Some key macroeconomic data on the evolution of economic and financial variables are listed (the exchange rate is expressed using the Ghanaian local currency, the cedi with the U.S. dollar). Answer the following:

a. When you look at these statistics could you observe a relationship between money supply, price level and exchange rate?

GDP growth, Money growth, Exchange rate and Inflation YEAR GDP growth Money growth Exchange Rate Inflation 1980 −0.47 33.80 2.75 50.07 1981 −3.50 51.32 2.75 116.50 1982 −6.92 23.34 2.75 22.30 1983 −4.56 40.21 8.83 122.87 1984 8.64 53.62 35.99 39.66 1985 5.09 46.17 54.37 10.30 1986 5.20 47.94 89.20 24.57 1987 4.80 53.33 153.73 39.82 1988 5.63 46.28 202.35 31.36 1989 5.09 54.67 270.00 25.22 1990 3.33 13.30 326.33 37.26 1991 5.28 39.08 367.83 18.03 1992 3.88 52.28 437.09 10.06 1993 4.85 33.50 649.06 24.96 1994 3.30 52.57 659.71 24.87 1995 4.11 43.17 1200.43 59.46 1996 4.60 39.20 1637.23 46.56 1997 4.20 44.09 2050.17 27.89 1998 4.70 17.49 2314.15 14.62 1999 4.41 25.42 2669.30 12.41 2000 3.69 54.24 5455.06 25.19 2001 4.00 31.69 7170.76 32.91 2002 4.50 48.85 7932.70 14.82 2003 5.20 34.23 8677.37 26.67 2004 5.60 27.44 9004.63 12.62 2005 5.90 9.35 9072.54 15.12

b. Calculate the percent changes in the general price level and price of the Ghana cedi from 1994 to 1996. How do these compare to each other and to the percent increase in the money supply? What relationship do you observe between the variation of exchange rate and the inflation rate?

c. Some research has found a correlation between the price of crude oil in the world market, the exchange rate, and the effects of political election in Ghana.
Could you explain the relationship between these variables?