Question

In this activity, you will calculate the quantity of money in circulation based on the data below provided by the South African Reserve Bank for 2013 and 2014:

Year	Coins and bank notes in circulation (Rm)	Demand deposits (Rm)	Short-term and medium-term deposits (Rm)
2013	87 014	1 045 025	748 093
2014	94 193	1 148 557	787 178

1. Calculate the value of M1 for 2013 and 2014.
2. Calculate the value of M2 for 2013 and 2014.
3. Explain why it is not possible to calculate the value of M3 from the above information?

Answer 1

ANS A.

M1 for 2013 = Coins and notes in circulation + Demand Deposits for 2013

= 87014 + 1045025 = 1132039

M1 for 2014 = Coins and notes in circulation + Demand Deposits for 2014

94193 + 1148557 = 1242750

ANS B.

M2 of 2013 = M1 + short term deposits of 2013

= 1132039 + 748093 =1880132

M2 of 2014 = M1 + short term deposits of 2014

= 1242750 + 787178 = 2029928

ANS C

The M3 is not possible to be computed from the given information as M3 has the summation of M2 and large term deposits, funds of institutional money market etc and these are not provided in the information given so it is not possible to calculate M3 from the given information.