1) You earn $500 a month, currently have $200 in currency, $100 in your checking
ID: 1160677 • Letter: 1
Question
1) You earn $500 a month, currently have $200 in currency, $100 in your checking account, $2,000 in your savings accounts, $3,000 worth of illiquid assets and $1,000 of debt. a) How much money (M1) do you have? b) What is your annual income? c) How much wealth do you have? 2) If a person withdraws $500 from his/her savings account and puts it in his/her checking account, a) will M1 increase, decrease, or not change? b) will M2 increase, decrease, or not change? 3) If a person withdraws $500 from his/her checking account and holds it as currency a) will M1 increase, decrease, or not change? b) will M2 increase, decrease, or not change? 4) Consider the information below for a simple economy. Assume there are no travelers checks. Currency: $1,000 Checking Account Balances: $2,000 Savings Account Balances: $5,000 Small-Denomination Time Deposits: $6,000 Noninstitutional Money Market Fund Shares: $7,000 a) What is M1 in this simple economy? b) What is M2 in this simple economy?Explanation / Answer
ANSWER:
According to chegg q and a policy only 4 parts are to be answered at a time and so i am answering first 3 parts of question 1 and 2 parts of question 2 , for rest of the answers , please ask separately.
1) a) M1 = checking account + amount in currency = $100 + $200 = $300
b) annual income = monthly income * no of months = $500 * 12 = $600
c) total wealth = amount in saving accounts + amount of illegal assets + amount in currency + amount in checking account - debt = $2,000 + $3,000 + $200 + $100 - $1,000 = $4,300
2) a) m1 will increase because checkings account is increasing and m1 includes checking account and so the m1 will increase by $500.
b) M2 will not change because M2 includes M1 and savings accounts and as money is being transfered from savings account to checking account and therefore it will lead to an increase in m1 and decrease in savings account , thereby making no change in M2.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.