Question

Considering the following data (expressed in billions of U.S. dollars), calculate M1 and M2.

Short answer

The value of $M1$measure of money supply is $2,200$billion

The value of $M2$measure of money supply is role="math" localid="1651586049359" $9,500$billion

Step-by-step solution

M1 Calculation

Calculating $M1-$

$\mathrm{Ml}=\text{Currency and coins}+\text{Traveler's checks}+\text{Transaction deposits}$

$\mathrm{M}1=\mathrm{\$}1,050\text{billion}+\mathrm{\$}10\text{billion}+\mathrm{\$}1,140\text{billion}$

$\mathrm{MI}=\mathrm{\$}2,200\text{billion}$

The value of $M1$ measure of money supply is $2,200$ billion

Step 2: M2 Calculation

Calculating $M2-$

$\mathrm{M}2=\mathrm{M}1+\text{Saving deposit}+\text{Small-denomination time deposits}+\text{Money market mutual fund}$

$\mathrm{M}2=\mathrm{\$}2,200\text{billion}+\mathrm{\$}5,500\text{billion}+\mathrm{\$}1,000\text{billion}+\mathrm{\$}800\text{billion}$

$\mathrm{M}2=\mathrm{\$}9,500\text{billion}$

The value of $M2$ measure of money supply is$9,500$ billion