India's Obtain data on price level and money supply. You can use Consumer Price Index and M1 as the money supply. Plot the M1, CPI, exchange rate ED/$, and domestic interest rates. Produce 4 graphs. In theory, one-off permanent increase in money supply is expected not to have any effect on the long run interest rates. Besides, the money supply should be accompanied by a proportional increase in prices, and some depreciation in the long run. Do you observe these predictions in the data?

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Answer Responsibility of the central bank of the country Reserve Bank of India in case of India RBI prints the currency and supplies money in the econ... View the full answer