Question

Suppose currency held outside banks is 200 billion, and m1 is 500 billion. Do we know for sure how much checkable deposits equal?

1) Yes, because to calculate checkable deposits, we simply need to subtract 200 billion from 500 billion.
2) No, because to calculate checkable deposits, we also need to know the amount in money market mutual funds.
3) No, because to calculate checkable deposits, we also need to know the amount in traveler's checks.
4) Yes, because to calculate checkable deposits, we simply need to add 200 billion to 500 billion.

Answer 1

No, we cannot determine the exact amount of checkable deposits without additional information about the specific amount of deposits held within banks.

Step-by-step explanation:

No, we do not know for sure how much checkable deposits are equal to based on the given information. Checkable deposits, also known as demand deposits, are the amounts held in checking accounts. To calculate the total amount of checkable deposits, we need to consider not only currency held outside of banks but also the deposits held within banks.

Checkable deposits are created when individuals and businesses deposit money into their checking accounts in banks. This increases the overall money supply in the economy. Since the question only provides information about currency held outside banks and M1, which includes currency and checkable deposits, we cannot determine the exact amount of checkable deposits without additional information.

To calculate the checkable deposits, we would need to know the specific amount of deposits held within banks.