KW_Macro_Ch_13_End_of_Chapter_Problems

KW_Macro_Ch_13_End_of_Chapter_Problems - chapter 13 Money,...

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>> Money, Banking, and the Federal Reserve System chapter 13 1. For each of the following transactions, what is the effect (increase or decrease) on M1? on M2? a. You sell a few shares of stock and put the proceeds into your savings account. b. You sell a few shares of stock and put the proceeds into your checking account. c. You transfer money from your savings account to your checking account. d. You discover $0.25 under the floor mat in your car and deposit it in your checking account. e. You discover $0.25 under the floor mat in your car and deposit it in your savings account. 2. There are three types of money: commodity money, commodity-backed money, and fiat money. Which type of money is used in each of the following situations? a. Mother-of-pearl seashells were used to pay for goods in ancient China. Salt was used in many European countries as a medium of exchange. c. For a brief time, Germany used paper money (the “Rye Mark”) that could be redeemed for a certain amount of grain rye. d. The town of Ithaca, New York, prints its own currency, the Ithaca HOURS, which can be used to purchase local goods and services. PROBLEMS
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3. The table below shows the components of M1 and M2 in billions of dollars for the month of December in the years 1995 to 2004 as published in the 2005 Economic Report of the President. Complete the table by calculating M1, M2, currency in circulation as a percent- age of M1, and currency in circulation as a percentage of M2. What trends or patterns about M1, M2, currency in circulation as a percentage of M1, and currency in circulation as a percentage of M2 do you see? What might account for these trends? 2 CHAPTER 13 PROBLEMS Currency Currency Time in in deposits circulation circulation Currency Money smaller as a as a in Traveler’s Checkable market than Savings percentage percentage Year circulation checks deposits funds $100,000 deposits M1 M2 of M1 of M2 1995 $372.1 $9.1 $745.9 $448.8 $931.4 $1,134.0 ? ? ? ?
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This note was uploaded on 04/10/2008 for the course ECONOMICS 103 taught by Professor Sheflin during the Spring '08 term at Rutgers.

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KW_Macro_Ch_13_End_of_Chapter_Problems - chapter 13 Money,...

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