Question

Currency held outside banks is 230 billion, money market mutual funds (retail) are 10 billion, small-denomination time deposits are 50 billion, and saving deposits (including money market deposit accounts) are 300 billion. How much does M2 equal?

Answer 1

The total M2 money supply equals \$590 billion, which is the sum of currency held outside banks, money market mutual funds, small-denomination time deposits, and saving deposits.

Step-by-step explanation:

The question asks us to calculate the total M2 money supply, which is a measure of the money supply that includes all elements of M1 (the most liquid forms of money, like cash and checking deposits) plus less liquid forms of money, such as savings accounts, money market mutual funds, and time deposits. To find total M2, we simply add together the values of currency held outside banks, money market mutual funds (retail), small-denomination time deposits, and saving deposits.

M2 is calculated as follows:

• Currency held outside banks: \$230 billion
• Money market mutual funds (retail): \$10 billion
• Small-denomination time deposits: \$50 billion
• Saving deposits (including money market deposit accounts): \$300 billion

Therefore, to calculate M2 we would add these figures together:

M2 = \$230 billion + \$10 billion + \$50 billion + \$300 billion = \$590 billion

The total M2 money supply is \$590 billion.