Question

Use the information in the table below to answer the following two questions.

Items Billions of $
Savings deposits 8000
Money market mutual funds 700
M2 13700
Checking deposits 1750
Small time deposits 750

How much is M1?
$
billion

Part 2 (1 point)See Hint
Now, calculate the amount of currency in billions of dollars in the economy from the given information (assume no traveler's checks).
$
billion

Answer 1

M1 money supply includes currency in circulation and demand deposits. M1 can be calculated using the formula M1 = M2 - Savings deposits - Money market mutual funds. The amount of currency in the economy is given as 2114.6 billion dollars.

Step-by-step explanation:

M1 money supply includes currency in circulation and demand deposits (checking deposits). To calculate M1, we can sum up the values of currency and checking deposits from the given information. From the table, the currency value is not explicitly provided, so we'll need to derive it by subtracting the other components of M2 from M2. M1 would be:

M1 = Currency + Demand deposits = M2 - Savings deposits - Money market mutual funds

M2 is given as 13700 billion dollars, Savings deposits is 8000 billion dollars, and Money market mutual funds is 700 billion dollars. Substituting these values, we can find M1:

M1 = 13700 - 8000 - 700 = 5700 billion dollars

For part 2, to calculate the amount of currency in the economy, we can directly use the provided value of currency given in the table. Currency in the economy would be:

Currency = 2114.6 billion dollars