Suppose a small country has the following monies in circulation: Cash/currency: $5 million Checkable deposits: $14 million Small-denomination time deposits: $15 million Savings deposits: $20 million Money market deposit accounts: $25 million Share in retail money market mutual funds: $11 million Calculate the value of M1 and M2. Now suppose bank customers transfer $10 million from their savings accounts to their checking accounts. What will happen to the value of M1 and M2 (i.e., will they rise, fall, or stay the same)?
Suppose a small country has the following monies in circulation: Cash/currency: $5 million Checkable deposits: $14 million Small-denomination time deposits: $15 million Savings deposits: $20 million Money market deposit accounts: $25 million Share in retail money market mutual funds: $11 million Calculate the value of M1 and M2. Now suppose bank customers transfer $10 million from their savings accounts to their checking accounts. What will happen to the value of M1 and M2 (i.e., will they rise, fall, or stay the same)?
Chapter18: Money And The Federal Reserve System
Section: Chapter Questions
Problem 17SQ
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Suppose a small country has the following monies in circulation:
Cash/currency: $5 million
Checkable deposits: $14 million
Small-denomination time deposits: $15 million
Savings deposits: $20 million
Share in retail money market mutual funds: $11 million
- Calculate the value of M1 and M2.
- Now suppose bank customers transfer $10 million from their savings accounts to their checking accounts. What will happen to the value of M1 and M2 (i.e., will they rise, fall, or stay the same)?
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