Learning Materials
Features
Discover
Chapter 3: Q.7 (page 110)
Was money a better store of value in the United States in the 1950s than in the 1970s? Why or why not? In which period would you have been more willing to hold money?
Rate of inflation plays vital role in stating the value of a currency.
Over 30 million students worldwide already upgrade their learning with 91影视!
All the tools & learning materials you need for study success - in one app.
Get started for free
Over several hundred years, payments systems used in countries across the world have evolved. For each of the following situations identify the type of payment utilized and at least one reason why economies are moving from checks to electronic payments.
a. Sheila visits a local grocery store to purchase a dozen eggs and a bag of dog food. She uses a 鈧�100 note to pay for the goods.
b. Rachael Garcia, a manager at Proxall Pharmacy, used a piece of gold worth $20 to pay for office supplies she needed this month.
c. Edward has just moved to the city to be closer to his office. He was shopping online for some pieces of furniture and he bought a wardrobe and a table lamp. He used a checking account to initiate an automatic bill payment for the items.
Assume that you are interested in earning some return on the idle balances you usually keep in your checking account and decide to buy some money market mutual funds shares by writing a check. Comment on the effect of your action (with everything else the same) on M1 and M2
Explain the concept of liquidity.
Rank the following assets from most liquid to least liquid:
a. Land
b. The inventory of a merchandiser
c. Cash in hand
d. A savings account at a local bank
e. A one-year bond
f. Ordinary shares
19. The table below shows hypothetical values, in billions of dollars, of different forms of money.
a. Use the table to calculate the M1 and M2 money supplies for each year, as well as the growth rates of the M1 and M2 money supplies from the previous year.
b. Why are the growth rates of M1 and M2 so different? Explain.
| 2019 | 2020 | 2021 | 2022 | |
| Currency | 880 | 895 | 900 | 906 |
| Money market mutual fund shares | 680 | 685 | 683 | 692 |
| Saving account deposits | 5,500 | 5,780 | 5,968 | 6,105 |
| Money market deposit accounts | 1,214 | 1,245 | 1,274 | 1,329 |
| Demand and checkable deposits | 1,000 | 972 | 980 | 993 |
| Small denomination time deposits | 840 | 871 | 1,133 | 1,576 |
| Traveler's check | 5 | 5 | 4 | 3 |
| 3-month treasury bills | 1,986 | 2,374 | 2,436 | 2,502 |
Which of the Federal Reserve鈥檚 measures of the monetary aggregates鈥擬1 or M2鈥攊s composed of the most liquid assets? Which is the larger measure?
What do you think about this solution?
We value your feedback to improve our textbook solutions.
Explanations 
Textbooks 
Flashcards 
91影视 AI 
Notes 
Study Plans 
Study Sets 
Find a degree 
Magazine