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 role="math" localid="1651586425691" $2,100$billion

The value of $M2$ measure of money supply is$8,750$ billion

Step-by-step solution

M1 Calculation

Calculating $M1-$$\text{MI}=\text{Currencyand coins}+\text{Traveler's checks}+\text{Transaction deposits}$

$\mathrm{Ml}=\mathrm{\$}1,050\text{billion}+\mathrm{\$}25\text{billion}+\mathrm{\$}1,025\text{billion}$

$\mathrm{M}1=\mathrm{\$}2,100\text{billion}$

The value of $M1$ measure of money supply is role="math" localid="1651586701118" $2,100$ billion

M2 Calculation

Calculating $M2-$

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

$\mathrm{M}2=\mathrm{\$}2,100\text{billion}+\mathrm{\$}3,300\text{billion}+\mathrm{\$}1,450\text{billion}+\mathrm{\$}1,900\text{billion}$

$\mathrm{M}2=\mathrm{\$}8,750\text{billion}$

The value of $M2$ measure of money supply is $8,750$ billion