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The Close Relationship Between M2 and Nominal GDP in the 1960s

question 47

Multiple Choice

The close relationship between M2 and nominal GDP in the 1960s and 1970s vanished from the 1980s through 2007.Which of the following contributed to this breakdown?
I.deregulation of the banking industry
II.introduction of new financial products (not included in M2) which allowed people to transfer funds into their checking accounts as and when needed
III.monetary policy lags


Definitions:

Loan Payment

A payment made by a borrower to a lender, consisting of both principal and interest, on a borrowed sum.

Compounded Quarterly

The process of calculating interest on both the initial principal and the accumulated interest from previous periods, done four times a year.

Withdraw

The process of withdrawing money from an account, investment, or deposit.

Interest

Interest is the charge for borrowing money, typically expressed as an annual percentage rate, representing compensation to the lender for the risk and opportunity cost of lending funds.

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