money supply
TRANSCRIPT
MONEY SUPPLY
Our Money Supply• Money consist of coins, paper money,
demand (or checking) deposits, and checklike deposits (commonly called NOW – or negotiable order of withdrawal – accounts) held by the nonbank public– Coins and paper money together are considered
currency– Six of every ten dollars in our money supply are
demand deposits and other checkable deposits• Virtually all the rest is currency
– Checks are not money but checking deposits are
13-12Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
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Our Money Supply
Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Federal Reserve Statistical Release, April 5, 2001
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Our Money Supply: M1
Currency
+ Demand deposits
+ Other checkable deposits
+ Traveler’s checks
M1(traditionally our basic money supply)
Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
M1 = $1,368.4 (billions of dollars), June 2005
The Federal Reserve uses three definitions of the money supply: M1, M2, and M3.
M1 is equally split between currency in circulation and checkable bank deposits
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Our Money Supply: M2 Currency
+ Demand deposits
+ Other checkable deposits
+ Traveler’s checks
M1
+ Savings deposits
+ Small-denomination time deposits (less than $100,00)
+ Money market mutual funds held by individuals
M2 Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
M2 = $6,510.0 (billions of dollars), June 2005
• The Federal Reserve uses three definitions of the money supply: M1, M2, and M3.
M2 has a much broader definition: it includes M1, plus a range of other deposits and deposit-like assets, making it about three times as large.
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Our Money Supply: M1, M2, M3 Currency
+ Demand deposits
+ Other checkable deposits
+ Traveler’s checks
M1
+ Savings deposits
+ Small-denomination time deposits (less than $100,00)
+ Money market mutual funds held by individuals
M2
+ Large denomination time deposits (more than $100,00)
+ Money market mutual funds held by institutions
+ Other less liquid assets
M3
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Our Money SupplyM1, M2, and M3, January 2001
Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
M1=1,107 M2=5,111 M3=7,361
Currency incirculation
539
Traveler'schecks
8
Demanddeposits
309
Othercheckabledeposits
251
Money market mutual fundsheld by institutions
903
Other lessliquid assets
550
Large-denominationtime deposits
797
M25111
Savingdeposits
1970M11107
Money marketmutual funds
held by individuals985 Small-denomination
time deposits1049
Federal Reserve Bulletin
Our Growing Money Supply
13-18Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000
20181614121086420
Ð2Ð4
Annual Percentage Change in the Money Supply, M1, 1960-2000
Credit Cards
• Is the Credit Card in your wallet Money?– It is accepted everywhere(Medium of exchange)
– You get a bill (Unit of Account)