Can someone expaline to me how to calculate these. The table below shows the Uni
ID: 1247609 • Letter: C
Question
Can someone expaline to me how to calculate these.The table below shows the United States components of M1 and M2 in billions of dollars for the month of December in the years 1998 to 2007 as published in the 2008 Economic report of the President.
Year Currency in circulation Traveler's checks Checkable deposits Money market funds Time deposits smaller than $100,000 Savings deposits M1
M2
Currency in circulation as a percentage of M1
Currency in circulation as a percentage of M2
1998 460.5 8.5 626.5 728.9 952.4 1,605.0
1999 517.8 8.6 596.2 819.7 956.8 1,740.3
2000 531.2 8.3 548.0 908.0 1,047.6 1,878.8
2001 581.2 8.0 592.6 962.3 976.5 2,312.8
2002 626.3 7.8 585.6 885.3 896.0 2,778.2
2003 662.5 7.7 635.9 777.4 818.7 3,169.1
2004 697.6 7.5 671.2 697.1 829.9 3,518.3
2005 723.9 7.2 643.4 699.9 995.8 3,621.4
2006 748.9 6.7 611.4 799.4 1,170.4 3,698.6
2007 759.0 6.3 599.2 976.1 1,216.8 3,889.8
a. Complete the table by calculating M1 (5 points),
b. Calculating M2 (5 points),
c. Calculating currency in circulation as a percentage of M1 (5 points) , and
d. Calculating currency in circulation as a percentage of M2 (5 points).
e. Examining the following three charts and your completed table, what trends or patterns in:
- M1,
- M2,
- currency in circulation as a percentage of M1, and
- currency of circulation as a percentage of M2 do you see (5 points)?
f. What might account for these trends
Explanation / Answer
From 1998 to 2007, there is no obvious trend in M1. M1 grew by $269 billion but was essentially stable from 1998 to 2002; all of this growth occurred between 2003 and 2007. There is, however, a clear upward trend throughout the period for M2, which grew by $3065.4 billion. Currency as a percentage of M1 grew from 42 percent to over 55 percent from 1998 to 2007, but currency as a percentage of M2 remained relatively constant, varying from a low of 10.2% to a high of 10.9%. The increase in currency as a percentage of M1 could reflect increased use of credit cards, causing a reduction in the importance of traveler