Using data from the St. Louis Federal Reserve
(FRED) (http://research.stlouisfed.org/fred2/),
analyze the money supply.
a. Download and graph monthly data for
M1 (M1SL) and M2 (M2SL) for the period
from 1990 to the present. Calculate the
growth rate as the percentage change from
the same month in the previous year.
Describe the relationship between the two
measures of the money supply.
Which is
more volatile?
b. Download and graph the data for the
“St. Louis Adjusted Monetary Base”
(AMBSL) form 1990 to the present.
Calculate the growth rate as the percentage
change from the same month in the
previous
year. How does this growth rate
compare to the growth rates of M1 and M2
you found in part (a)?
i. In general, what happens to M1 and M2
as the monetary base increases?
ii. Is the relationship that you found in part
different during the 2007–2009 period?