What happens to the value of m1 and to m2

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Reference no: EM13154306

Compute M1 and M2 given the following. Assume any asset not listed has a zero value.

Asset	Amount(Billions of Dollars)
Currency and Coins not in bank vaults	110
Savings Deposits	220
Checkable Deposits	300
Small Time Deposits of less than $100,000	200
Credit Card Balances	140
Stock and Bond Mutual Funds	100
Traveler's Checks	120
Nonbank Public Holdings of US Savings Bonds	45

1. Calculate M1.

2. Calculate M2.

3. Suppose Aunt Sophie transfers $1,000 to her savings account from her checking account. What happens to the value of M1 and to M2?

4. Suppose Uncle Nacho sells shares of Time Warner stock for $20,000 and puts the proceeds from the sale into his money market mutual fund account. What happens to the value of M1 and to M2?

5. Why aren't credit card balances included in M1 or M2?

6. What are the two reasons people wish to hold money?

7. Which of the reasons for holding money gives the demand curve for money its downward slope? Why?

Reference no: EM13154306

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