Calculating reserves, monetary base, and M2

Related BrainMass Solutions

• Trends in Currency Circulation

  Complete the table by calculating M1, M2, currency in circulation as a percentage of M1, and currency in circulation as a percentage of M2.

• Role of Central Bank

  The level of money stock is the product of two components: the monetary multiplier and the monetary base. The monetary base is the quantity of government-produced money. It consists of currency held by the public and total reserves held by banks.

• Money Multiplier & Currency holdings

  The monetary aggregate can signify either narrow money, M1 or broad money, M2 while MB is the reserves of the commercial banks kept with the central bank and currency held with the public.

• Economic Systems Questions

  The federal budget will often show a surplus as the tax base increases. The terms M1, M2, M3 refer to the monetary aggregates.

• Monetary policy multiple choice

  The monetary base includes: D) currency and cash plus commercial bank deposits at the Fed.

• Effects of newly printed currency

  The sudden increase in M1 caused a sudden increase in the monetary base, which includes M1 and bank reserves. See http://www.federalreserve.gov/releases/h3/20081023/. This means that the funds the Fed paid to banks are simply sitting in the vault.

• Federal Tax Revenues

  Time deposits are a part of M1 but not M2. M1 is a larger dollar figure than M2. Required reserves are the amount of_________________.

• The money multiplier

  If the bank lends out all excess reserves monetary base will increase by $30000. Money multiplier is 10. So, money supply will increase by Money Multiplier * Change in Monetary Base = 10 * 30000 = $300000.

• US Economy Function and Regulation

  M2 = M1 + all near moneys. In the real world, money supply has different definitions: M1 and M2. Money is categorized according to its liquidity. The most liquid items are in M1. 3.