Classical economists found that nominal income is determined by the cash mass has confidence that speed PY/M can be considered reasonably constant l whether or not it is reasonable to assume that the speed is constant? The answer to that question, let's take a look at Figure 2. 1, which shows that in the year 1915-change speed in 1996 (nominal income represents the nominal GDP and the money supply (m) and Af2).
What we see in Figure 1 is that even in the short term, the speed changes too much to be seen as a constant. Before 1950 speed exhibited fluctuations of the up and down. This reflects a significant economic instability in this period that includes two world wars Audemar Piguet replica watches and the great depression.(Actually decreases the speed, or at least growth decreases during recessions occur.)After 1950 the speed seems to be more moderate vibrations, but there are significant differences in the growth rate from year to year.
Percentage change in the aft speed (GDP/MI) from 1981-1982, for example, was 2.5%, whereas in the period 1980-1981 speed increased in size 4. 2%. This difference of 6-7% means that the nominal GDP grew by 6. 7 per cent less than it would if the rate is increasing at the same rate as in 1980-1981. (l) drop enough to take account of the serious decline that occurred in 1981-1982.After 1982 MI speed seems to have become even more volatile, a fact which has puzzled researchers when reviewing the empirical evidence on the demand for money 2 and speed are more stable than M speed of 1982, as a result of the Federal Reserve System dropped his purpose in 1987 and started to pay more for a goal. However, volatility MHz speed in the early 1990s led to THE FED'S announcement in July 1993, that it did not believe that any monetary aggregates, including A/2, is a reliable guide for monetary policy.
Before the great depression economists do not recognize that the speed is Cartier Santos replica during the severe economic downturn.Why classical economists does not recognize this fact when it is easy to see from pro-depression in Figure 1?Unfortunately accurate data on GDP and money supply did not exist before the second world war.Only after the war, the Government began collecting this data. no Economists know that their opinion about the speed as a constant was manifestly false. slow down during the great depression was so great, however, even the raw data for economists, but suggests that speed is not a constant. This explains why, after the great depression, economists started looking for other factors affecting the demand for money, which may help explain variations in speed.
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