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Chapter 15: Q. 5 (page 346)

Considering the following data (expressed in billions of U.S. dollars), calculate M1 and M2.

Short Answer

Expert verified

The value of M1measure of money supply is role="math" localid="1651586425691" 2,100billion

The value of M2 measure of money supply is8,750 billion

Step by step solution

01

M1 Calculation

Calculating M1-MI=Currencyand coins+Traveler's checks+Transaction deposits

Ml=$1,050billion+$25billion+$1,025billion

M1=$2,100billion

The value of M1 measure of money supply is role="math" localid="1651586701118" 2,100 billion

02

M2 Calculation

Calculating M2-

M2=M1+Saving deposit+Small - denomination time deposits+Money market mutual fund

M2=$2,100billion+$3,300billion+$1,450billion+$1,900billion

M2=$8,750billion

The value of M2 measure of money supply is 8,750 billion

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