Analysis a relationship about economic Statistics Project

Analysis a kindred about economic - Statistics Project ExampleThe m championy in supply and inflation rate is everlastingly interconnected beca go for a high amount of money in supply usually devalue demand for money. For instance, in a small town if all residents were to get $50 raise in their salary all(pre titular) month, if they were paying about $14 on their gas, then with the rise they will likely not drumhead paying $15 given the fact that it is relatively less than what they normally spent on throttle per week. In to the highest degree cases, this is normally how the affinity between inflation and money often starts, when the market is adapted to bear high prices due to increase in the money supply (Mishkin, 40). Therefore, most customers will most likely opt out of buying a product at the same price it was ahead the inflation occurred simply because the buying power of the currency has been worn out.The graph above shows the estimated value of the relationship betwe en inflation and money growth. The rate of inflation depends on the amount of money in supply. When one takes into consideration the classical theory, money does not affect real variables but has an effect on nominal variables such as inflation. This, therefore, means that when plotting the graph, the rate of inflation will be plotted on the y-axis turn the supply of money will be plotted on the x-axis. The blue dots are the actual values while the red line shows the fitted values.In the long run, the correlation between money and inflation is instead high and can be estimated to almost one. However, when the short term period is taken into consideration, the relationship between money and inflation is rather weak which could be an attributing factor as to why the curve cover the relationship between money and inflation is not straight.Several economic theories can be utilise in order to try to explain the relationship between money supply and inflation. If one were to use the q uantity supply theory, also refers to as monetarism, the relation between money in supply and