The index of industrial production is an output measure that is not as comprehensive as GDP, but it is available on a more timely basis (monthly rather than quarterly). Calculate the percentage 12-month growth rates in the index of industrial production and in the money supply, and graph these.
(a) Are growth in industrial production and in the money supply positively correlated or negatively correlated?
(b) Does one time series lead the other, or are they coincident?
(c) Are your answers to (a) and (b) consistent with what we observe in Figure 3.13? Explain.
