Is this change likely to have much effect on the economy

Reference no: EM131023193

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. If the U.S. Treasury adopted Velde's proposal, what would be the effect on the value of M1? Is this change likely to have much effect on the economy?

(Hint: According to the information given in this chapter, what is the current value of M1?)

Reference no: EM131023193

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