Sunday, December 4, 2011

I need help with m1 and m2 economics.?

Asset Amount(Billions of Dollars)


Currency and Coins not in bank vaults


1200


Savings Deposits 1300


Checkable Deposits 1000


Small Time Deposits of less than $100,000 4000


Credit Card Balances 1400


Stock and Bond Mutual Funds 100


Traveler's Checks 20


Nonbank Public Holdings of US Savings Bonds 45





Calculate M1.


Calculate M2.


Suppose Aunt Sophie transfers $1,000 from her checking account to her savings account. What happens to the value of M1 and to M2?


Suppose Uncle Nacho sells shares of Time Warner stock for $20,000 and puts the proceeds from the sale into his passbook savings account. What happens to the value of M1 and to M2?


Why aren't debit card balances included in M1 or M2?


Why aren't credit card balances included in M1 or M2?|||M1 includes items used to finance transactions:





Currency and coins 1200


Checkable deposits 1000


Traveler's checks 20


Total M1: 2220





M2 includes:


Total M1 2220


Savings deposits 1300


Small time deposits 4000


Total M2: 7520





The other items on the list are in neither M1 nor M2





Aunt Sophie's transaction would decrease M1 by $1,000, no change to M2





Uncle Nacho's transaction would increase M2 by $20,000, no change to M1





Debit card balances are ignored because they are also included as checkable deposits - to include them would be double accounting





Credit card balances are not included because they are only promises to pay

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