a) In ordinary language, explain the meaning of Velocity of Money.

b) State and explain the variables in the equation of exchange.

c) Use the equation of exchange stated in b) above to explain the relationship between changes in the money supply and the price level. State any assumptions made.

d) Using the equation of exchange from part b) and information of the Bank of Ghanas Quarterly Bulletin/Statistical Bulletin as well as quarterly GDP releases from the Ghana Statistical Service, calculate the Velocity of Money for the Ghanaian economy from the first quarter of 2020 to the second quarter of 2021.

e) Based on your answer from d) is it reasonable to assume that the Velocity of Money is constant in Ghana? Why or why not?

f) The Bank of Ghana currently announces its monetary policy in terms of changes in the interest rates (i.e. Monetary Policy Rate). Based on the information in parts d)-e) do you think it should continue to implement this practice? If yes, explain why. If not, what should it target then?