2. This question asks you to quantify the misperceptions theory.

a. The impact of unanticipated money growth can be measured by observing the growth of money supply and GDP. Use quarterly data for the Eurozone between 2000 and 2018 to compare the rate of growth of M1 to that of GDP. What can you say about the relationship between the two variables?

b. On a separate figure, graph the growth rate of M1 with the interest rate on government bonds interest and the discount rate charged by the ECB. What is the relationship between unanticipated money growth and these interest rates?