Define the money stock measures M1 and M2
Money Stock Measures and the U.S. Economy (Professor Responses)
Please discuss Figure 1 from Chapter 16 of the course textbook. Define the money stock measures M1 and M2. Also discuss the stock measures M0 and M3, which are not mentioned in Chapter 16 (please find a source).
#2 Demand Deposits (Student)
Demand deposits are funds that have been deposited into bank accounts but depositors can have access to on demand through the use of checks or debit cards. These funds should be included in the stock of money because the depositors can use them the same as having actual currency in their pocket. Many people these days don’t actually carry cash, things are paid for using debit cards rather than dollar bills. If this money were not counted towards the stock of money the amount would be much lower and not accurately reflect what is taking place in the economy. This is especially true considering the fact that the location of a lot of the available currency is questionable.
#3 The Quantity Theory of Money (Professor)
Please define the quantity theory of money as discussed in Chapter 17 of the course textbook. How does Figure 2 in Chapter 17 illustrate the quantity theory of money? How is the quantity theory of money related to the concept of the velocity of money?
#4 Trade Deficits and the Balance of Trade (Professor)
Please define the balance of trade concept as discussed in Chapter 18 of the course textbook. What are the factors that may influence a national economy’s trade balance? How is net capital outflow related to the trade balance?
#5 The Open Economy and International Trade (Professor)
How is the market for loanable funds, the market for foreign currency exchange, and net capital outflow related in an open economy? How does net capital outflow depend on the interest rate (refer to Figure 3 in Chapter 19)?
Solution preview
M0 is cash money in form of material which includes coins, notes, and bearer certificates that can be converted upon demand. M1 on the other hand is a sum of M0 and bank deposits that can instantly be converted to cash of equivalent value. M2 is the sum of M1 and any deposits that can be converted into cash within thirty days………………………
APA
583 words