/*! This file is auto-generated */ .wp-block-button__link{color:#fff;background-color:#32373c;border-radius:9999px;box-shadow:none;text-decoration:none;padding:calc(.667em + 2px) calc(1.333em + 2px);font-size:1.125em}.wp-block-file__button{background:#32373c;color:#fff;text-decoration:none} Q2. Assume that Jimmy Cash has \(2,0... [FREE SOLUTION] | 91影视

91影视

Log out

Learning Materials

Features

Discover

Chapter 14: Q2. (page 302)

Assume that Jimmy Cash has \(2,000 in his checking account at Folsom Bank and uses his checking account debit card to withdraw \)200 of cash from the bank鈥檚 ATM machine. By what dollar amount did the M1 money supply change as a result of this single, isolated transaction?

Short Answer

Expert verified

The M1 money supply will remain unchanged.

Step by step solution

01

Step 1. M1 component of the money supply

M1 is a component of the money supply that includes the currency in circulation, traveler鈥檚 checks, and checkable deposits. The currency in circulation includes notes and coins, and checkable deposits are deposits with the bank against which any size of check can be drawn.

02

Step 2. No change in the M1 money supply

When Jimmy withdraws $200 from the bank鈥檚 ATM, it increases the amount of the currency in circulation, but at the same time, decreases the total amount of checkable deposits. As a checkable deposit is a part of the M1 money supply, there will be a decrease of $200 in M1.

Therefore, there will be no change in the M1 money supply as the M1 money supply is still $200 because it initially decreases to $1800 when he withdrew money and then increases to $2000 when he uses the cash for the transaction.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Over 30 million students worldwide already upgrade their learning with 91影视!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Assume that securitization combined with borrowing and irrational exuberance in Hyperville have driven up the value of asset-backed financial securities at a geometric rate, specifically from \(2 to \)4 to \(8 to \)16 to \(32 to \)64 over a 6-year time period. Over the same period, the value of the assets underlying the securities rose at an arithmetic rate from \(2 to \)3 to \(4 to \)5 to \(6 to \)7. If these patterns hold for decreases as well as for increases, by how much would the value of the financial securities decline if the value of the underlying asset suddenly and unexpectedly fell by $5?

Which of the following is not a function of the Fed?

a. Setting reserve requirements for banks.

b. Advising Congress on fiscal policy.

c. Regulating the supply of money.

d. Serving as a lender of last resort.

What are the three basic functions of money? Describe how rapid inflation can undermine money鈥檚 ability to perform each of the three functions.

Suppose that a small country currently has \(4 million of currency in circulation, \)6 million of checkable deposits, \(200 million of savings deposits, \)40 million of small-denominated time deposits, and \(30 million of money market mutual fund deposits. From these numbers we see that this small country鈥檚 M1 money supply is _______鈥�, while its M2 money supply is 鈥奯______.

a. \)10 million; \(280 million

b. \)10 million; \(270 million

c. \)210 million; \(280 million

d. \)250 million; $270 million

Explain and evaluate the following statements:

a. The invention of money is one of the great achievements of humanity, for without it the enrichment that comes from broadening trade would have been impossible.

b. Money is whatever society says it is.

c. In the United States, the debts of government and commercial banks are used as money.

d. People often say they would like to have more money, but what they usually mean is that they would like to have more goods and services.

e. When the price of everything goes up, it is not because everything is worth more but because the currency is worth less.

f. Any central bank can create money; the trick is to create enough, but not too much, of it.
See all solutions

Recommended explanations on Economics Textbooks

Taxation Economics

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.