Question

Assume that the following asset values (in millions of dollars) exist in Ironmania:

Category

Value

Federal Reserve Notes in circulation

$ 700

Money market mutual funds (MMMFs) held by individuals

400

Corporate bonds

300

Iron ore deposits

50

Currency in commercial banks

100

Savings deposits, including money market deposit accounts (MMDAs)

140

Checkable deposits

1,500

Small-denominated (less than $100,000) time deposits

100

Coins in circulation

40

Instructions: Enter your answers as whole numbers.

a. What is M1 in Ironmania? $ _________million.

b. What is M2 in Ironmania? $_________ million.

Answer 1

Answer:

a. $2,240

b. $2,880

Explanation:

The computations are shown below:

a. For M1:

= Notes in circulation + Check-able deposits +  Coins in circulation

= $700 + $1,500 + $40

= $2,240

b. For M2:

= M1 + saving deposits + time deposit + Money market mutual funds (MMMFs) held by individuals

= $2,240 + $140 + $100 + $400

= $2,880

All other information which is given is not relevant. Hence, ignored it