Question

What is the value of M2?

Checkable deposits: $400,000,000

Currency: $340,000,000

Traveler's checks: $4,000,000

Money Market mutual funds:$50,000000

Small time deposits: $6,000000

Savings deposits: $850,000,000

Answer 1

Answer : In the economy, money supply is measured by M2 where M1 is the element of M2. Hence to find the value of M2 firstly we have to find the value of M1. We can get the value of M1 by the following way:

M1 = Currency + Checkable deposits + Traveller's check

By putting given values in M1, we have,

M1 = 340000000 + 400000000 + 4000000

=> M1 = $744000000

Now,

M2 = M1 + Money market mutual fund + Small time deposits + saving deposits

By putting values we get,

=> M2 = 744000000 + 50000000 + 6000000 + 850000000

=> M2 = $1650000000

Therefore, the value of M2 is $1650000000.