Let M2 = Currency + Deposits + Time Deposits + Money Market Mutual Funds Let t be the time deposit ratio, f the money market ratio, e the excess reserves ratio and r the required reserves ratio. 1. If the Ms = M2, derive m2 the money multiplier. 2. Explain why m2 is always greater than m1. Under which conditions, does m2 = m1? 3.Suppose that currency outside of banks is $600 billion, the amount of checkable deposits is $900 billion, excess reserves are $15 billion, and the required reserves ratio is 10%. Calculate the monetary base and the amount of total reserves.

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