Question

Draw a graph showing the growth rates of M1(M1SL) and M2(M2SL) for the period from 1960...

Draw a graph showing the growth rates of M1(M1SL) and M2(M2SL) for the period from 1960 until present. Which usually grows faster and why? Then draw a graph displaying M2 divided by M1 and discuss the long-run pattern
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Answer #1

The graph below is taken from research. stlaoushied.org, and the shaded region depics the recession time in US. the blue line is M1(M1SL) and the red line depicts M2(M2SL).

the line shows the M1 & M2 from the period 1960 till now.

And from the graph we see that usually M2 grows gaster than M1 as there is some multiplier effect. But this is not the case always, specially during recession time. During this time M1 grows faster but considering overall then M2 moves faster.

When we draw a graph displaying M2/M1 it will look like :-

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