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 |
- Calculate M1.
- Calculate M2.
- Suppose Aunt Sophie transfers $1,000 to her savings account from her checking account. What happens to the value of M1 and to M2?
- 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?
- Why aren't credit card balances included in M1 or M2?
- What are the two reasons people wish to hold money?
- Which of the reasons for holding money gives the demand curve for money its downward slope? Why?