11 Sprint 1147 AM 9 Use the figures in the table below to an

.11 Sprint? 11:47 AM 9. Use the figures in the table below to answer the following questions Smal time deponits Moneymarketutual funds held by Savings deposits, including money market deposit aceounts Money market utlNunes hlby Cumeney (a) What is the value of M1? (b) What is the value of M2? 10. Using the balance sheet below and assuming a required reserve ratio of 20%, answer the following: What is the amount of excess reserves? (b) This bank can safely expand its loans by what amount? (c) By expanding its loans by this amount in part (bl, its checkable deposits would expand to what amount (if all loans were made to checking account customers)? (d) If checks clear against the bank equal to the amount loaned in (b), how much would remain in reserves and in checkable deposits? Liablities +Net Worth Reserves 40,000 Checkable deposits $100,000 o.000 Stock shares 460,000 0,000 Property 400,000

Solution

Question 9

(a)

M1 = Currency + Checkable deposits

M1 = $836 billion + $325 billion

M1 = $1,161 billion

The value of M1 is $1,161 billion.

(b)

M2 = M1 + Small time deposits + Savings deposits, including money market deposits accounts + Money market mutual funds held by individuals

M2 = $1,161 billion + $1,250 billion + $1,520 billion + $906 billion

M2 = $4,837 billion

The value of M2 is $4,837 billion