Thank you for visiting Suppose the M2 money supply is 13 trillion including 7 trillion in savings accounts 3 trillion in checking accounts 1 trillion in money market mutual. This page is designed to guide you through key points and clear explanations related to the topic at hand. We aim to make your learning experience smooth, insightful, and informative. Dive in and discover the answers you're looking for!
Answer :
Final answer:
The M1 money supply, consisting of currency and checkable (demand) deposits, amounts to $4 trillion in this case. Other components of the M2 supply like savings accounts, money market mutual funds, and certificates of deposit are not included in M1.
Explanation:
Measuring money supplies is crucial in economics. Your question relates to determining the M1 money supply from a provided M2 money supply. Based on the information given and the definitions of M1 and M2, we need to determine which parts of the M2 money supply are included in M1.
The M1 money supply includes currency and checkable deposits, also known as demand deposits. This means M1 will consist of money in physical form (coins and bills not held by the U.S. Treasury or in bank vaults) and the amounts held in checking accounts. Other items in the M2 supply like savings deposits, money market funds, and certificates of deposit are not counted in M1.
Given this knowledge, we can say that the M1 money supply in your example is: $1 trillion (currency) + $3 trillion (checkable deposits) = $4 trillion.
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Rewritten by : Jeany
The M1 money supply is the sum of currency, demand deposits, traveler's checks, and other checkable deposits. In this case, the M1 money supply is $13 trillion, since it includes $7 trillion in savings accounts, $3 trillion in checking accounts, $1 trillion in money market mutual funds, $1 trillion in certificates of deposit, and $1 trillion in currency.
Currency includes coins and paper money, and demand deposits are the funds that people have in their checking accounts. Traveler's checks and other checkable deposits are funds that customers can access quickly, such as those in online accounts.
In summary, the M1 money supply is the sum of currency, demand deposits, traveler's checks, and other checkable deposits. In this case, the M1 money supply is $13 trillion, as it includes $7 trillion in savings accounts, $3 trillion in checking accounts, $1 trillion in money market mutual funds, $1 trillion in certificates of deposit, and $1 trillion in currency.
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