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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