Money and prices in the short-run

In response to the Great Recession of 2007-2009, the Federal Reserve dramatically expanded the supply of money in the US.

Download the following data from FRED:

• M2 Money Stock (M2SL): https://research.stlouisfed.org/fred2/series/M2SL
• Consumer Price Index for All Urban Consumers (CPIAUCSL): http://research.stlouisfed.org/fred2/series/CPIAUCSL
• Real Gross Domestic Product (GDPCA): https://research.stlouisfed.org/fred2/series/GDPCA

Be sure that the data frequencies for M2 and the CPI are monthly and that the data frequency for real GDP is annual. Set the date range for each series to January 1, 2005 to January 1, 2020.

Do the following.

1. Plot M2 for the US from January 1, 2005 to January 1, 2020. Make sure that your graph is titled clearly. Upload an image of your answer as a jpeg, png, or pdf file.
2. Plot the CPI for the US from January 1, 2005 to January 1, 2020. Make sure that your graph is titled clearly. Upload an image of your answer as a jpeg, png, or pdf file.
3. 

Compute the average annual growth rate of M2 for the US over the 2005 - 2020 period using the following formula: 1 XJau.1 smn)m _ 1 9X 2 (Km. 1, sons 1' where X is M2. Report your answers as decimals rounded to at least three decimal places. Do not lnclude commas, dollar signs, or other nonnumeric characters ln your answer {E.g., if the growth rate is 50 percent, enter 0.509.} Enter your answer here Compute the average annual growth rate of the CPI for the US over the 2005 - 2020 period using the following formula: 9X = XJan. 1, 2020 2020-2005 XJan. 1, 2005 - 1, where X is the CPI. Report your answers as decimals rounded to at least three decimal places. Do not include commas, dollar signs, or other non-numeric characters in your answer. (E.g., if the growth rate is 50 percent, enter 0.500.) Enter your answer hereCompute the average annual growth rate of real GDP for the US over the 2005 2020 period using the following formula: 1. XJanJ smn)m _ 1 9X 2 (Km. 1., 2005 1 where X is real GDP. Report your answers as decimals rounded to at least three decim ol places. Do not include commas, dollar signs, or other nonnumeric characters in your onswen {E.g., if the growth rate is 50 percent, enter 0.500.} Enter your answer here Use the average rates of money and real GDP growth for the US from 2005 to 2020 to compute the average rate of inflation implied by the quantity theory of money. By how much does the quantity theory of money over-predict the actual rate of inflation? Enter your answer hereWhat assumption underlying the quantity theory of money is causing the theory to not well explain the observed relationship between money growth, real GDP growth, and ination from 2005 to 2020? Enter your answer here