Question

The following table holds data from FRED* on real GDP and M2 for the third quarters of 2019 and 2014. Month/Yr Real GDP (billions M2 (billions of of chained dollars) dollars) 11,457 17,047 14,931 19,113 Aug/2014 Aug/2019 *Real-time data provided by Federal Reserve Economic Data (FRED), Federal Reserve Bank of Saint Louis. The sum of M2 and real GDP represents the gross wealth of the United States. This claim is false . Using the data recorded above, complete the following table by computing the average annual rate of change in each variable over the given five-year span. A minus sign if necessary.) Percentage Change from Aug/2014 to Aug/2019 M2 Real GDP %

Answer 1

F = P *(1+I)^t

For % age change in M2

t = 5 yrs

F= 14931, P = 11457

14931 = 11457 * (1+i)^5

(1+i)^5 = 14931 / 11457 = 1.3032207

1+i = 1.3032207 ^ (1/5) = 1.0543956

I = 1.0543956 - 1 = 0.0543956 = 5.44%

For % age change in Real GDP

t = 5 yrs

F= 19113, P = 17047

19113 = 17047 * (1+i)^5

(1+i)^5 = 19113 / 17047 = 1.1211943

1+i = 1.1211943 ^ (1/5) = 1.0231426

I = 1.0231426 - 1 = 0.0231426 = 2.31%