Question

The table below shows hypothetical values, in billions of dollars, of different forms of money.

a.Use the table to calculate the M1 and M2 money supplies for each year, as well as the growth rates of the M1 and M2 money supplies from the previous year.

b.Why are the growth rates of M1 and M2 so different? Explain.

c. Go to the web site of the St. Louis Federal Reserve Bank FRED database and graph the (year-over-year) growth rates of M1 and M2 for the sample period 1989-2019. Include your graph in your submission.