Real-Time Data Analysis Exercise* Measures and Components of Money in June 2018

Question

Real-Time Data Analysis Exercise* Measures and Components of Money in June 2018 Real-time data provided by Federal Reserve Economic Data (FRED), Federal Reserve Bank of Saint Louis Amount June 2018 (billions of dollars) 14,113.0 751.6 467.4 9,236.1 3,657.9 2,071.5 1,586.4 The table shows the quantities of M1, M2, and their components in June 2018 but with two items missing M2 Money market funds Smal time deposits What are the missing items? M1 A is Currency and traveler's checks IS Bank reserves Checkable deposits e-Checks Credit card balances Savings deposits Currency in bank cash machines Click to select your answer(s) and then click Check Answer All parts showing Clear All Check Answer

Explanation / Answer

1. A is Savings deposits

Explanation: Savings deposits is the largest portion of near money or M2

2. B is Currency in ATM machines

Explanation: Currency in ATM machines is as good as currency in circulation or M1. It is the currency or federal reserve notes that are in circulation.

3. What is fed and what is FOMC?-- B). Fed regulates financial institutions and FOMC is the federal reserve's main policy-making committee.

4. If the Fed wants to decrease the quantity of money, it makes an open market sale.

Explanation: Open market sale is done by selling securities to contract the economy or reduce the money supply while open market purchases are done by buying securities to expand the economy by increasing the money supply.

5. Reserves in the banking system decrease. Banks make more loans.

Explanation: When the reserve amount is decreased the amount by which it is decreased will be given out for lending purposes.

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