Question

In December 2005: Currency held by individuals and businesses, $724 billion Money market funds and other deposits, $711 billion. Savings deposits, $3,622 billion Time deposits, $974 billion Checkable deposits owned by individuals and businesses, $638 billion Traveler's checks held by individuals and businesses, $7 billion Calculate Ml and M2 in December 2005. M1 in December 2005 was $______ billion. M2 in December 2005 was $ ______billion.

Answer 1

Answer:

• M1 = $1,369
• M2 = $6,676

Explanation:

M1 and M2 are both definitions of money.

M1 refers to the most liquid cash which includes actual currency, checkable deposits and Traveler's checks.

M2 is M1 in addition to Savings deposits, time deposits and Money market funds

M1 = 724 + 638 + 7

= $1,369

M2 = 1,369 + 3,622 + 974 + 711

= $‭6,676‬