P5. The following information is available to you: travelers’ checks _

$1 million; coin and paper currency _ $30 million; repurchase agreements and Eurodollars _ $15 million; demand deposits _$25 million; retail money market mutual funds _ $60 million; savings accounts at depository institutions _ $40 million; checkable deposits at depository institutions _ $35 million; large-denomination time deposits _ $50 million; institutional money market mutual
funds _ $65 million; and small-denomination time deposits _$45 million. Using Fed definitions, determine the dollar sizes of the
a. M1 money supply
b. M2 money supply
c. M3 money supply

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I would need definitions of M1, M2 and M3, since I don't have the Fed definitions.

To determine the dollar sizes of the M1, M2, and M3 money supplies, we need to understand the components that make up each of these measures according to the Federal Reserve (Fed) definitions.

a. M1 Money Supply:
The M1 money supply includes the most liquid and readily spendable forms of money. It consists of the following components:
1) Demand Deposits: These are checking accounts held at depository institutions (such as banks) on which checks can be drawn by depositors at any time. In the given information, demand deposits are mentioned as $25 million.
2) Travelers' Checks: These are a form of prepaid checks widely accepted as a medium of exchange. In this case, the value of travelers' checks is given as $1 million.
3) Coin and Paper Currency: This represents physical money in the form of coins and paper bills held by the public. The given information states the value of coin and paper currency as $30 million.

Therefore, to calculate the M1 money supply, we sum up the values of these components:
M1 = Demand Deposits + Travelers' Checks + Coin and Paper Currency
M1 = $25 million + $1 million + $30 million
M1 = $56 million

b. M2 Money Supply:
The M2 money supply includes all components of M1 plus additional less liquid assets. In addition to the components of M1, M2 also includes the following:
4) Retail Money Market Mutual Funds: These are mutual funds that invest in short-term debt instruments and serve as a low-risk investment option for individuals. Given as $60 million.
5) Savings Accounts at Depository Institutions: These are accounts with depository institutions (e.g., banks, credit unions) that pay interest on deposited funds. Mentioned as $40 million in the given information.

To calculate the M2 money supply, we include M1 along with the additional components:
M2 = M1 + Retail Money Market Mutual Funds + Savings Accounts
M2 = $56 million + $60 million + $40 million
M2 = $156 million

c. M3 Money Supply:
The M3 money supply includes all components of M2 plus additional large time deposits and institutional money market mutual funds. In addition to the components of M2, M3 includes the following:
6) Large-denomination Time Deposits: These are higher value time deposits, usually with a minimum deposit amount. In this case, the value is given as $50 million.
7) Institutional Money Market Mutual Funds: These are money market funds that cater to institutional investors. Provided value is $65 million.

To calculate the M3 money supply, we add M2 along with the additional components:
M3 = M2 + Large-denomination Time Deposits + Institutional Money Market Mutual Funds
M3 = $156 million + $50 million + $65 million
M3 = $271 million

Therefore, the dollar sizes of the money supplies are:
a. M1 money supply = $56 million
b. M2 money supply = $156 million
c. M3 money supply = $271 million