Question

The u.s. penny is made primarily of zinc. there have been several times in recent years when zinc prices have been high and it has cost the u.s. treasury more than one cent to manufacture a penny. there are currently about 1.4 billion pennies in circulation. economist​ françois velde of the federal reserve bank of chicago has proposed making the current penny worth 5 cents.

Answer 1

The effect of this proposal would cause AN INCREASE IN the value of M1.

Step-by-step explanation:

M1 includes the value of all coins and bills in circulation + checking accounts + N.O.W. accounts (negotiable order of withdraw) + travelers' checks.

Currently the value of all pennies in circulation = 1.4 billion x $0.01 = $14 million. If their value is increased to 5 cents, then $14 million x 5 = $70 million.

$70 million is a lot of money for a person or a business, but for the economy it is not really a significant amount so its impact would be really small.