Macroeconomics (Book Only)
12th Edition
ISBN: 9781285738314
Author: Roger A. Arnold
Publisher: Cengage Learning
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Question
Chapter 12, Problem 1VQP
To determine
Changes in M1 and M2.
Expert Solution & Answer
Explanation of Solution
M1 and M2 indicate the money supply in the economy. The M1 category involves currency held in hand checkable deposits and traveler’s checks. The M2 category involves all M1 category money supply plus saving deposit, time deposit, and
Economics Concept Introduction
Money supply: Money supply refers total stock of money circulated in the economy.
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Name a reason why retail Money Market Mutual Funds are not included in M1 but demand deposits and other checkable deposits are. What specific role of money does this analysis (e.g. medium of exchange, standard of value, standard of deferred payments, store of value) pertain to?
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Chapter 12 Solutions
Macroeconomics (Book Only)
Ch. 12.2 - Prob. 1STCh. 12.2 - Prob. 2STCh. 12.2 - Prob. 3STCh. 12.3 - Prob. 1STCh. 12.3 - Prob. 2STCh. 12.3 - Prob. 3STCh. 12.4 - Prob. 1STCh. 12.4 - Prob. 2STCh. 12.4 - Prob. 3STCh. 12 - Prob. 1VQP
Ch. 12 - Prob. 2VQPCh. 12 - Prob. 3VQPCh. 12 - Prob. 4VQPCh. 12 - Prob. 5VQPCh. 12 - How much money did you make last year? What is...Ch. 12 - Prob. 2QPCh. 12 - Prob. 3QPCh. 12 - Prob. 4QPCh. 12 - Prob. 5QPCh. 12 - Prob. 6QPCh. 12 - Prob. 7QPCh. 12 - Prob. 8QPCh. 12 - Prob. 9QPCh. 12 - Prob. 10QPCh. 12 - Prob. 11QPCh. 12 - Prob. 12QPCh. 12 - Prob. 13QPCh. 12 - Prob. 14QPCh. 12 - Prob. 15QPCh. 12 - Prob. 16QPCh. 12 - Prob. 17QPCh. 12 - Prob. 1WNGCh. 12 - Prob. 2WNGCh. 12 - Prob. 3WNGCh. 12 - Prob. 4WNGCh. 12 - Prob. 5WNGCh. 12 - Prob. 6WNGCh. 12 - Prob. 7WNGCh. 12 - Prob. 8WNGCh. 12 - Prob. 9WNGCh. 12 - Prob. 10WNG
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- If you take 100 out of your piggy bank and deposit it in your checking account, how did M1 change? Did M2 change?arrow_forwardDetermine whether each of the following is included in both M1 and M2 or M2 only: a. a Connecticut quarter b. a savings account at a local savings bank c. a share draft account at a credit union d. money market deposit accounts e. American Express travelers’ checksarrow_forwardGiven the following information, what are the values of M1 and M2? Small time deposits $650 billion Demand deposits and other checkable deposits $30 billion Savings deposits $750 billion Money market mutual funds $600 billion Travelers' checks $25 billion Large time deposits $600 billion Currency $100 billion Miscellaneous categories in M2 $25 billionarrow_forward
- John deposits $1,600 into his checking account. If the reserve ratio is 5%, what are the required and excess reserves? Required reserves: $ Excess reserves: $arrow_forwardwhy does m2 fall and not remain unchanged? doesn't M2 consist of both M1 and M2? so when M1 rise (due to more cash), savings account (which is under M2) will drop by the same amount as M1 rise, hence overall M2 will remain unchanged?arrow_forward1.4arrow_forward
- Required reserves in Bank two should be 10% of $80,000 demand deposits which equals 8,000. Correct?arrow_forwardFor a required reserve ration of 10% and reserves equal to $50, how much money could could be created in a fractional reserve banking system? $500 $50 $750 $3000arrow_forwardYour answer is incorrect. The economy of Greatstown currently has $60.00 million worth of currency in circulation, $2.00 million worth of traveler's checks, $5.00 million in small time-deposits, and $30.00 million in savings deposits. Total M1 is equal to $120.00 million. Calculate the amount of checkable deposits in Greatstown: 58000000arrow_forward
- If Jason deposits $2,500 into his bank and the reserve ratio is 11%, what would be the amount of excess reserves that are immediately created? $30.25 $244.75 $275 $1,980.25 $2,225arrow_forwardIf you have kept savings in a retail money market fund, and you withdraw funds that are then deposited in your checking account, which of the following is true? Both M1 and M2 decrease. Both M1 and M2 increase. M1 stays the same and M2 increases. O M1 increases and M2 stays the same.arrow_forwardIf a bank has $200,000 of checkable deposits, a required ratio of 20 percent, and it holds $80,000 in reserves, then what is the maximum deposit outflow it can sustain without altering its balance sheet?arrow_forward
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