South-Western EconData -- Money Supply

Diagrams/Data

Diagrams and Data

Explore further current and historical data for money supply (M2) and how it relates to the inflation rate (CPI), real GDP, and the unemployment rate.

Current and Historical Data for M2
Review the current and historical data for M2 at Economagic.com.

M2 Money Supply And The Consumer Price Index: Annual Percent Change Relative To Same Period Last Year
In the following diagram we can see the relationship between the inflation rate (as measured by the rate of change in the consumer price index) and the growth rate of the M2 money supply. If the money supply grows faster than real GDP, then accelerated inflation can occur due to "more money chasing a given quantity of goods and services". Thus we might expect a direct relationship between the M2 money supply and the consumer price index. Offsetting this, however, is the "policy effect" -- the Fed tends to increase the money supply when real GDP growth is slowing in order to spur economic growth. Inflation rates tend to be lower during periods of slow economic growth and recession. The data in the diagram generally show an inverse relationship between the growth rate of the money supply and inflation, indicating the dominance of the policy effect and the extent to which the Fed uses the money supply to control inflation. CPI inflation fell throughout 2006, which may have occurred in part due to the Fed generally reducing the growth rate in M2 over the preceding three years.

Economagic.com provides a more complete collection of data for the following:
M2 I Inflation Rate (CPI)

M2 Money Supply And Real GDP: Annual Percent Change Relative To Same Period Last Year
With the following diagram we can compare the annual growth rate of the money supply to the annual growth rate in real GDP (the rate of economic growth). The rate of growth in the money supply is considered to be a leading economic indicator because the Fed tends to increase the money supply in an attempt to counteract an anticipated slowing of economic growth. One can see that the Fed has responded to slowing or negative economic growth in 1982, 1990, and 2001 by increasing the money supply. Going into 2007, the M2 money supply and GDP have been growing at approximately the same rate, with some uncertainty about future trends in economic growth and inflation.

Economagic.com provides a more complete collection of data for the following: M2 I Real GDP

M2 Money Supply: Annual Percent Change And The Unemployment Rate: Annual Change, Both Relative To Same Period Last Year
In this diagram we can compare the growth rate in the money supply (as measured by M2) to the annual change in the unemployment rate. When unemployment is high, the Fed will tend to increase the money supply, whereas when unemployment is very low and there are inflationary concerns, the Fed will tend to reduce the growth rate of the money supply. Over the last several years the employment rate has been slowly declining, allowing the Fed to focus almost entirely on reducing inflationary pressures and maintaining price stability.

Economagic.com provides a more complete collection of data for the following:
M2 I Unemployment Rate