At the moment the market is completely ignoring things like record U.S. trade deficits and the widening curent account deficit. It is also largely ignoring the possibility of Federal Reserve rate cuts. Traders and investors are instead focusing only on the fiscal and monetary easing in Japan and monetary easing in Germany.
a. In what way is fiscal easing in Japan relevant here?
b. In what way is monetary easing in Germany relevant here?
The broader measure M2, however, since it encompasses most significant forms of money individuals may hold, resolves the problem. The shifts in asset holdings take place WITHIN the broader measure. That doesn't make it impervious to distrotion, but M2 velocity has shown substantial predictability for several years.
a. What is M2 velocity?
b. Explain why M2 velocity should be more predictable than M1 velocity.
c. What is the problem referred to at the very end of the first sentence, and exactly how does M2 solve this problem?
Please answer to specific questions, don't leave a copied wall of text