13 Since 1990 the growth rate of M2 seems to have stopped be

13) Since 1990, the growth rate of M2 seems to have stopped being a useful tool for predicting inflation. What explanations does the book offer foe this change? A.The relationship between M2 and inflation applies only at high levels of inflation. B. M1 has become a better predictor of inflation because of the financial crisis. C. We need a new measure of money that takes into account recent changes in the way we make payments and use money. A only B only C only A,Band C A and C but not B

Solution

Solution: A and C but not B

Explanation: Growth in M2 is not a useful tool for forecasting inflation because the relationship among these are applicable only at high levels of inflation. Moreover there is a requirement of a new measure of money that considers recent changes in the way we make payments and use money.