- Explain whether each of the following is counted in the M1 measure of the money supply:
- Cash that you have been saving from birthdays and special occasions.
- Money in your savings account at your credit union.
- Money in your checking account at your credit union.
- Visa gift cards.
- Available balance on your American Express card.
- Refer to the simplified balance sheet for a bank and answer the following questions.
Assets | Liabilities | ||
Reserves | $15,000 | Deposits | $78,000 |
Loans | $68,000 | Stockholder’s equity | $8,500 |
- If the required reserve ratio is 3.5%, how much in excess reserves does this bank hold? Show your work.
- What is the maximum amount this bank can expand on its loans? Show your work.
- What will happen to the M1 money supply if it makes the loans under (b) above and those funds are deposited into another bank by the borrowers?
- part of an expansionary fiscal policy
- part of a contractionary fiscal policy
- part of an expansionary monetary policy
- part of a contractionary monetary policy
- Identify and explain each event as:
- The corporate income tax rate is increased.
- Defense spending is increased.
- Families are allowed to deduct all daycare expenses from their federal income taxes.
- The Federal Reserve Bank sells Treasury securities.
- The Federal Reserve Bank buys Treasury securities.