Question

. Go to the web site of the Federal Reserve Bank of St. Louis
(FRED)(research.stlouisfed.org/fred2/) and find the most
recent values and values from the same month 5 years and 10
years earlier from FRED for M1 Money Stock (M1SL) and
the M2 Money Stock (M2SL).
a. Using these data, Calculate M1 as a proportion of M2
for each of years.
b. Explain whether this proportion has increased,
decreased, or reminded the same over time

Answer 1

The most recent M1 and M2 values available are for the month of December 2017. The respective months 5 and 10 years earlier would be December 2012 and December 2007.

The following table shows the M1SL and M2SL value for all the years.

a. The M1/M2 ratio has also been calculated in column number 4.

b. The M1/M2 ratio has increased from 0.18 in December 2007 to 0.23 in December 2012. This has further increased to 0.26 in December 2017. So we can say that the M1 as a proportion of M2 has increased over the time.