Measures of Money Supply- An aggregate of the money assets in the economy at a given point of time is commonly known as the Money Supply in the economy. There are varied measures of money supply but the standard among them are M0, M1, M2, M3 and M4. Measure Includes Means M0 Currency; Coins, Cash and Other demand deposits and liquid assets held by the central bank Narrow money; smallest measure of money supply; most liquid financial assets MB M0 + Vault cash with Central Bank + Excess and Required reserves with banks Monetary Base; Total currency in the economy. It is the basis of the creation of M,,M2,M3 and M4. M1 M0+Traveler’s checks of non-bank issuers +Demand deposits (chequing accounts and sight deposits) + OCDs (Other Checkable Deposits) + NOW (Negotiable Order of Withdrawal) at depository institutions and credit union share draft accounts. Very liquid money (often narrow money too) M2 M1+ Savings Deposits + Money Market Securities + Mutual Funds + Time deposits (< $100,000) Broad Money or Narrow Money +“Near Money” M3 M2 + Large Time Deposits +Institutional Money Market Funds + Short term Purchases + Broadest measure of money supply- “Near, near Money” and relate to large financial institutions and corporations than individuals and small businesses M4 M3+all other deposits Least liquid form of money supply. In UK, M3 is M4. The use of measures varies from country to country

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Answer 1

Question

Chapter 15, Problem 4P

To determine

Concept introduction:

Measures of Money Supply- An aggregate of the money assets in the economy at a given point of time is commonly known as the Money Supply in the economy. There are varied measures of money supply but the standard among them are M0, M1, M2, M3 and M4.

Measure Includes Means

M0 Currency; Coins, Cash and Other demand deposits and liquid assets held by the central bank Narrow money; smallest measure of money supply; most liquid financial assets

MB M0 + Vault cash with Central Bank + Excess and Required reserves with banks Monetary Base; Total currency in the economy. It is the basis of the creation of M,,M2,M3 and M4.

M1 M0+Traveler’s checks of non-bank issuers +Demand deposits (chequing accounts and sight deposits) + OCDs (Other Checkable Deposits) + NOW (Negotiable Order of Withdrawal) at depository institutions and credit union share draft accounts. Very liquid money (often narrow money too)

M2 M1+ Savings Deposits + Money Market Securities + Mutual Funds + Time deposits (< $100,000) Broad Money or Narrow Money +“Near Money”

M3 M2 + Large Time Deposits +Institutional Money Market Funds + Short term Purchases + Broadest measure of money supply- “Near, near Money” and relate to large financial institutions and corporations than individuals and small businesses

M4 M3+all other deposits Least liquid form of money supply. In UK, M3 is M4. The use of measures varies from country to country

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Answer 2

Question

Chapter 15, Problem 4P

To determine

Concept introduction:

Measures of Money Supply- An aggregate of the money assets in the economy at a given point of time is commonly known as the Money Supply in the economy. There are varied measures of money supply but the standard among them are M0, M1, M2, M3 and M4.

Measure Includes Means

M0 Currency; Coins, Cash and Other demand deposits and liquid assets held by the central bank Narrow money; smallest measure of money supply; most liquid financial assets

MB M0 + Vault cash with Central Bank + Excess and Required reserves with banks Monetary Base; Total currency in the economy. It is the basis of the creation of M,,M2,M3 and M4.

M1 M0+Traveler’s checks of non-bank issuers +Demand deposits (chequing accounts and sight deposits) + OCDs (Other Checkable Deposits) + NOW (Negotiable Order of Withdrawal) at depository institutions and credit union share draft accounts. Very liquid money (often narrow money too)

M2 M1+ Savings Deposits + Money Market Securities + Mutual Funds + Time deposits (< $100,000) Broad Money or Narrow Money +“Near Money”

M3 M2 + Large Time Deposits +Institutional Money Market Funds + Short term Purchases + Broadest measure of money supply- “Near, near Money” and relate to large financial institutions and corporations than individuals and small businesses

M4 M3+all other deposits Least liquid form of money supply. In UK, M3 is M4. The use of measures varies from country to country

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Answer 3

Question

Chapter 15, Problem 4P

To determine

Concept introduction:

Measures of Money Supply- An aggregate of the money assets in the economy at a given point of time is commonly known as the Money Supply in the economy. There are varied measures of money supply but the standard among them are M0, M1, M2, M3 and M4.

Measure Includes Means

M0 Currency; Coins, Cash and Other demand deposits and liquid assets held by the central bank Narrow money; smallest measure of money supply; most liquid financial assets

MB M0 + Vault cash with Central Bank + Excess and Required reserves with banks Monetary Base; Total currency in the economy. It is the basis of the creation of M,,M2,M3 and M4.

M1 M0+Traveler’s checks of non-bank issuers +Demand deposits (chequing accounts and sight deposits) + OCDs (Other Checkable Deposits) + NOW (Negotiable Order of Withdrawal) at depository institutions and credit union share draft accounts. Very liquid money (often narrow money too)

M2 M1+ Savings Deposits + Money Market Securities + Mutual Funds + Time deposits (< $100,000) Broad Money or Narrow Money +“Near Money”

M3 M2 + Large Time Deposits +Institutional Money Market Funds + Short term Purchases + Broadest measure of money supply- “Near, near Money” and relate to large financial institutions and corporations than individuals and small businesses

M4 M3+all other deposits Least liquid form of money supply. In UK, M3 is M4. The use of measures varies from country to country

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Answer 4

Question

Chapter 15, Problem 4P

To determine

Concept introduction:

Measures of Money Supply- An aggregate of the money assets in the economy at a given point of time is commonly known as the Money Supply in the economy. There are varied measures of money supply but the standard among them are M0, M1, M2, M3 and M4.

Measure Includes Means

M0 Currency; Coins, Cash and Other demand deposits and liquid assets held by the central bank Narrow money; smallest measure of money supply; most liquid financial assets

MB M0 + Vault cash with Central Bank + Excess and Required reserves with banks Monetary Base; Total currency in the economy. It is the basis of the creation of M,,M2,M3 and M4.

M1 M0+Traveler’s checks of non-bank issuers +Demand deposits (chequing accounts and sight deposits) + OCDs (Other Checkable Deposits) + NOW (Negotiable Order of Withdrawal) at depository institutions and credit union share draft accounts. Very liquid money (often narrow money too)

M2 M1+ Savings Deposits + Money Market Securities + Mutual Funds + Time deposits (< $100,000) Broad Money or Narrow Money +“Near Money”

M3 M2 + Large Time Deposits +Institutional Money Market Funds + Short term Purchases + Broadest measure of money supply- “Near, near Money” and relate to large financial institutions and corporations than individuals and small businesses

M4 M3+all other deposits Least liquid form of money supply. In UK, M3 is M4. The use of measures varies from country to country

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Answer 5

Chapter 15, Problem 4P

To determine

Concept introduction:

Measures of Money Supply- An aggregate of the money assets in the economy at a given point of time is commonly known as the Money Supply in the economy. There are varied measures of money supply but the standard among them are M0, M1, M2, M3 and M4.

Measure Includes Means

M0 Currency; Coins, Cash and Other demand deposits and liquid assets held by the central bank Narrow money; smallest measure of money supply; most liquid financial assets

MB M0 + Vault cash with Central Bank + Excess and Required reserves with banks Monetary Base; Total currency in the economy. It is the basis of the creation of M,,M2,M3 and M4.

M1 M0+Traveler’s checks of non-bank issuers +Demand deposits (chequing accounts and sight deposits) + OCDs (Other Checkable Deposits) + NOW (Negotiable Order of Withdrawal) at depository institutions and credit union share draft accounts. Very liquid money (often narrow money too)

M2 M1+ Savings Deposits + Money Market Securities + Mutual Funds + Time deposits (< $100,000) Broad Money or Narrow Money +“Near Money”

M3 M2 + Large Time Deposits +Institutional Money Market Funds + Short term Purchases + Broadest measure of money supply- “Near, near Money” and relate to large financial institutions and corporations than individuals and small businesses

M4 M3+all other deposits Least liquid form of money supply. In UK, M3 is M4. The use of measures varies from country to country

Answer 6

Chapter 15, Problem 4P

To determine

Concept introduction:

Measures of Money Supply- An aggregate of the money assets in the economy at a given point of time is commonly known as the Money Supply in the economy. There are varied measures of money supply but the standard among them are M0, M1, M2, M3 and M4.

Measure Includes Means

M0 Currency; Coins, Cash and Other demand deposits and liquid assets held by the central bank Narrow money; smallest measure of money supply; most liquid financial assets

MB M0 + Vault cash with Central Bank + Excess and Required reserves with banks Monetary Base; Total currency in the economy. It is the basis of the creation of M,,M2,M3 and M4.

M1 M0+Traveler’s checks of non-bank issuers +Demand deposits (chequing accounts and sight deposits) + OCDs (Other Checkable Deposits) + NOW (Negotiable Order of Withdrawal) at depository institutions and credit union share draft accounts. Very liquid money (often narrow money too)

M2 M1+ Savings Deposits + Money Market Securities + Mutual Funds + Time deposits (< $100,000) Broad Money or Narrow Money +“Near Money”

M3 M2 + Large Time Deposits +Institutional Money Market Funds + Short term Purchases + Broadest measure of money supply- “Near, near Money” and relate to large financial institutions and corporations than individuals and small businesses

M4 M3+all other deposits Least liquid form of money supply. In UK, M3 is M4. The use of measures varies from country to country

Answer 7

Chapter 15, Problem 4P

To determine

Concept introduction:

Measures of Money Supply- An aggregate of the money assets in the economy at a given point of time is commonly known as the Money Supply in the economy. There are varied measures of money supply but the standard among them are M0, M1, M2, M3 and M4.

Measure Includes Means

M0 Currency; Coins, Cash and Other demand deposits and liquid assets held by the central bank Narrow money; smallest measure of money supply; most liquid financial assets

MB M0 + Vault cash with Central Bank + Excess and Required reserves with banks Monetary Base; Total currency in the economy. It is the basis of the creation of M,,M2,M3 and M4.

M1 M0+Traveler’s checks of non-bank issuers +Demand deposits (chequing accounts and sight deposits) + OCDs (Other Checkable Deposits) + NOW (Negotiable Order of Withdrawal) at depository institutions and credit union share draft accounts. Very liquid money (often narrow money too)

M2 M1+ Savings Deposits + Money Market Securities + Mutual Funds + Time deposits (< $100,000) Broad Money or Narrow Money +“Near Money”

M3 M2 + Large Time Deposits +Institutional Money Market Funds + Short term Purchases + Broadest measure of money supply- “Near, near Money” and relate to large financial institutions and corporations than individuals and small businesses

M4 M3+all other deposits Least liquid form of money supply. In UK, M3 is M4. The use of measures varies from country to country

Answer 8

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Answer 9

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Answer 10

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Answer 11

Ch. 15 - Prob. 15.1LO Ch. 15 - Prob. 15.2LO Ch. 15 - Prob. 15.3LO Ch. 15 - Prob. 15.4LO Ch. 15 - Prob. 15.5LO Ch. 15 - Prob. 15.6LO Ch. 15 - Prob. 15.1SC Ch. 15 - Prob. 15.2SC Ch. 15 - Prob. 15.3SC Ch. 15 - Prob. 15.4SC

Measure	Includes	Means
M0	Currency; Coins, Cash and Other demand deposits and liquid assets held by the central bank	Narrow money; smallest measure of money supply; most liquid financial assets
MB	M0 + Vault cash with Central Bank + Excess and Required reserves with banks	Monetary Base; Total currency in the economy. It is the basis of the creation of M,,M2,M3 and M4.
M1	M0+Traveler’s checks of non-bank issuers +Demand deposits (chequing accounts and sight deposits) + OCDs (Other Checkable Deposits) + NOW (Negotiable Order of Withdrawal) at depository institutions and credit union share draft accounts.	Very liquid money (often narrow money too)
M2	M1+ Savings Deposits + Money Market Securities + Mutual Funds + Time deposits (< $100,000)	Broad Money or Narrow Money +“Near Money”
M3	M2 + Large Time Deposits +Institutional Money Market Funds + Short term Purchases +	Broadest measure of money supply- “Near, near Money” and relate to large financial institutions and corporations than individuals and small businesses
M4	M3+all other deposits	Least liquid form of money supply. In UK, M3 is M4. The use of measures varies from country to country

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