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Economics

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 traveler's 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?

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Microeconomics, Economics

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