Question

Go to http://www.federalreserve.gov/releases/h6/Current/.

a. What have been the growth rates of M1 and M2 over the past 12 months?

b. From what you know about the state of the economy, do these growth rates seem expansionary or restrictive?

Short answer

a.

Period	M1 growth rate	M2 growth rate
Feb. 2021
Mar. 2021	1.49	1.23
Apr. 2021	1.54	1.31
May-21	1.75	1.54
Jun-21	0.31	0.20
Jul-21	0.92	0.81
Aug. 2021	1.27	1.13
Sept. 2021	0.77	0.67
Oct. 2021	0.84	0.74
Nov. 2021	1.09	0.97
Dec. 2021	0.77	0.68
Jan. 2022	0.81	0.82
Feb. 2022	0.435342	0.38

b.

This growth rate appears to be restrictive as they are very minimal. The growth rate is below 2%, some are even below 1%.

Step-by-step solution

Step 1. Introduction

Money supply can be defined as the volume of money available in the economy at a point. M1, M2, M3, and M4 are different measures of money suuply. M1 measure includes currency in circulation, traveler's checks, and demand deposits. M2 includes M1, money market deposit accounts and money market mutual fund shares, savings deposits, and small-denomination time deposits.

Step 2. Explanation 

a. The percentage growth rate for M1 and M2 has been calculated below:

Period	M1	Percentage growth	M2	Percentage growth
Feb. 2021	18,367.90		19,649.90
Mar. 2021	18,641.50	1.4895551	19,892.00	1.23
Apr. 2021	18,928.50	1.5395757	20,152.40	1.31
May-21	19,259.70	1.7497425	20,462.90	1.54
Jun-21	19,319.10	0.308416	20,504.80	0.20
Jul-21	19,497.00	0.9208504	20,671.10	0.81
Aug. 2021	19,745.50	1.2745551	20,905.20	1.13
Sept. 2021	19,897.60	0.7703021	21,045.70	0.67
Oct. 2021	20,064.90	0.8408049	21,200.50	0.74
Nov. 2021	20,283.60	1.0899631	21,407.20	0.97
Dec. 2021	20,439.50	0.7686012	21,553.10	0.68
Jan. 2022	20,604.50	0.8072605	21,728.90	0.82
Feb. 2022	20,694.20	0.4353418	21,811.80	0.38

b. This growth rate appears to be restrictive as they are very minimal. The growth rate is below 2%, some are even below 1%.