Question

Question 19

1. Table: Monetary Aggregates (in billions)
   Currency in circulation	$ 100
   Checkable deposits	$ 300
   Travelers checks	$ 50
   Savings deposits	$ 75
   Small-denomination time deposit	$ 700
   Money Market Mutual Funds (individuals)	$ 500
   Large denomination time deposits	$ 200

   (Table: Monetary Aggregates) Refer to the information in the table above. The money supply measures by M2 is:

   	a.	$450 billion
   	b.	$1,425 billion
   	c.	$1,725 billion
   	d.	$2,075 billion

Answer 1

M2 is a measure of the money supply that includes all elements of M1 as well as "near money." M1 includes cash and checking deposits, while near money refers to savings deposits, money market securities, mutual funds and other time deposits.

M1 ( in billions)

Currency in circulation= $100

Checkable deposits =     $300

Travelers checks=         $   50

Savings deposits=          $ 75

M2 ( in billions)

Small-denomination time deposits= $700

Money Market Mutual Funds (individuals)= $500

M2= M1+ M2 money supply=

M1= $100 + $300 +$50 + $75=525

M2=$525+($700+$500)=$525+$1,200=$1,725. Answer is C.