The table shows the amounts held as the various components of M1 and M2.
Calculate the value of M1 and M2.
The value of M1 is
$nothingm billion.
The value of M2 is
$nothingm billion.
Item
$billions
Savings deposits
300300
Checking deposits
200200
Small time deposits
280280
Money market funds and other deposits
300300
Currency and traveler's checks
7070
M1
M2
The value of M1 is
$870 billion.
The value of M2 is
$1,570 billion.
To calculate the value of M1, we need to sum up the following components: currency and traveler's checks, checking deposits, and any other forms of liquid money held by individuals or businesses.
In this given table, the currency and traveler's checks amount is $70 billion, and the checking deposits amount is $200 billion. So, the value of M1 can be calculated by adding these two amounts together:
M1 = $70 billion + $200 billion = $270 billion.
Similarly, to calculate the value of M2, we need to consider all the components of M1, as well as savings deposits, small time deposits, and money market funds and other deposits.
From the given table, the savings deposits amount is $300 billion, small time deposits amount is $280 billion, and money market funds and other deposits amount is $300 billion.
So, the value of M2 can be calculated as follows:
M2 = M1 + savings deposits + small time deposits + money market funds and other deposits
= $270 billion + $300 billion + $280 billion + $300 billion
= $1,150 billion or $1.15 trillion.
To calculate the value of M1, add the amounts of currency and traveler's checks, checking deposits, and other deposits:
M1 = Currency and traveler's checks + Checking deposits + Other deposits
= $70 billion + $200 billion + $300 billion
= $570 billion
To calculate the value of M2, add the amounts of M1, savings deposits, small time deposits, and money market funds:
M2 = M1 + Savings deposits + Small time deposits + Money market funds
= $570 billion + $300 billion + $280 billion + $300 billion
= $1,450 billion
Therefore, the value of M1 is $570 billion and the value of M2 is $1,450 billion.