Assume that the following asset values (in millions of dollars) exist in Ironman

Question

Assume that the following asset values (in millions of dollars) exist in Ironmania: Value Category $700 400 300 50 100 140 1,500 100 40 Federal Reserve notes in circulation Money market mutual funds (MMMFs) held by individuals Corporate bonds Iron ore deposits Currency in commercial banks Savings deposits, including money market deposit accounts (MMDAs) Checkable deposits Small-denominated (less than $100,000) time deposits Coins in circulation Instructions: Enter your answers as whole numbers. a. What is M1 in Ironmania? million b. What is M2 in Ironmania? million

Explanation / Answer

1) M1 in Ironmania: $2,240

Working:

M1 = Federal Reserve Notes in circulation + Coins in circulation + Checkable deposits

= $700 + $40 + $1500

= $2240

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2) M2 in Ironmania: $2880

Working:

M2 = M1 + Savings deposits, including Money market deposit accounts (MMDAs) + Money Market Mutual Funds (MMMFs) held by individuals + Small-denominated (less than $100,000) time deposits

= $2240 + $140 + $400 + $100

= $2880

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