Until 1933, the Unites States was on the gold standard, and people could receive gold from the federal government in exchange for their paper currency. Al- though the federal government is no longer willing to exchange paper currency for gold, the Federal Reserve still stores more than 500,000 gold bars in the basement of the New York Federal Reserve building in Manhattan. Are these gold bars included in either the M1 or M2 definition of the money supply? Briefly explain why they are, or are not included

ENGR.ECONOMIC ANALYSIS
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Author:NEWNAN
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Chapter1: Making Economics Decisions
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3.
Until 1933, the Unites States was on the gold standard, and people could
receive gold from the federal government in exchange for their paper currency. Al-
though the federal government is no longer willing to exchange paper currency for
gold, the Federal Reserve still stores more than 500,000 gold bars in the basement of
the New York Federal Reserve building in Manhattan. Are these gold bars included in
either the M1 or M2 definition of the money supply? Briefly explain why they are, or
are not, included.
Transcribed Image Text:3. Until 1933, the Unites States was on the gold standard, and people could receive gold from the federal government in exchange for their paper currency. Al- though the federal government is no longer willing to exchange paper currency for gold, the Federal Reserve still stores more than 500,000 gold bars in the basement of the New York Federal Reserve building in Manhattan. Are these gold bars included in either the M1 or M2 definition of the money supply? Briefly explain why they are, or are not, included.
Expert Solution
Step 1

The total quantity of money that is readily usable in an economy at any given time—including physical money, demand deposits, and numerous other kinds of liquid assets—is referred to as the money supply. 

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