Task 1 (20 marks, approx. 300 words) For this task you have been allocated a country that you can find in the file "EC2015 Task 1 Country.xlsx" available on Moodle. You

are asked to investigate various aspects of the country's monetary system by completing the following tasks: 1) According to the Quantity Theory of Money there is a direct relationship between money supply and inflation. Provide a brief and clear explanation of the precise quantitative nature of such a relationship. (5 marks) 2) Use inflation and money supply data from your country for the past 20 years or so and produce a graph and statistics to test whether the evidence supports the predictions of the Quantity Theory of Money in your given country. Comment on your findings. (5 marks) 3) Explain the 'Fisher Effect' and its relationship with the Quantity Theory of Money. Use data from your allocated country for the past 20 years to test the 'Fisher Effect' by producing a graph and any relevant statistics. Comment on your findings. (5 marks) 4) With reference to the data, statistics and graphs that you produced in your answer to 3) would you conclude that over the past 20 years your country experienced instances of liquidity trap'? Explain. (5 marks)