Question

In March 2006​, currency held by individuals and businesses and​ traveler's checks was ​$ 742 ​billion; checkable deposits owned by individuals and businesses were ​$ 642 ​billion; savings deposits were ​$3,641 ​billion; small time deposits were ​$1,020 ​billion; and money market funds and other deposits were ​$732 billion. Calculate M1 and M2 in March 2006.

Answer 1

M1 = $1,384 billion

M2 = $6,045 billion

Step-by-step explanation:

The money supply is made up of:

• M1: includes all coins and bills in circulation, travelers' checks and checking accounts
• M2: includes M1 + short term bank deposits and 24 hour money market funds
• M3: includes M2 + long term deposits and money market funds with more than 24 hour maturity

The M1 for 2006 is $742 ​billion + ​$642 ​billion = $1,384 billion

The M2 for 2006 is $1,384 billion + $3,641 ​billion + $1,020 ​billion = $6,045 billion