Exploring the Quantity Theory (2)

11. The data below give data for the average annual rates of money growth, inflation, and real income growth of several countries for the years 1979- 1984. Graph the relations between money growth and inflation, and between money growth and real income growth. Are the results consistent or inconsistent with the quantity theory?

Country	Money Growth	Inflation	Real Income Growth
United States	7.5%	6.5%	1.8%
Belgium	3.0	5.5	1.0
Italy	13.0	19.5	1.8
Japan	4.0	2.2	3.9
Finland	12.1	9.5	3.4
South Africa	30.5	14.9	2.5
Bolivia	220.3	205.9	-2.3
Ecuador	25.2	25.5	2.2
Honduras	9.2	7.1	0.7
Mexico	45.0	52.3	2.7
Peru	67.6	81.1	-0.3
Venezuela	15.3	12.9	-1.7
Cyprus	14.9	10.0	5.5
Bangladesh	18.2	11.4	3.3
Sri Lanka	16.8	18.0	5.1
India	15.6	8.8	5.5
Korea	15.8	10.7	5.8
Malaysia	9.5	4.2	6.9
Nepal	14.3	8.4	2.8
Singapore	9.2	5.3	8.6
Nigeria	14.7	9.8	-2.9

Source: Data taken from Review, The Federal Reserve Bank of St. Louis (Vol 70, No. 3 (May/June 1988), p. 15. Their data contained 62 countries. The above table shows every third country when ranked by rate of inflation.

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