1) You earn $500 a month, currently have $200 in currency, $100 in your checking
ID: 1203685 • 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?
Explanation / Answer
1. a) M1 = $200+$100+$2000 = $2300
1. b) Annual income = $500*12 = $6000
1. c) Net Wealth = $2300 (M1)+$3000 (illiquid assets) - $1000 (debts) = $4300
2. M1 - No change M2 - No change
3. M1 - No change M2 - No change
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