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# hw1_ans - M1 as a share of M2 has been falling this...

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1. Series M1 is more volatile (in the later period). M1 is more liquid than M2 and therefore more likely to vary. 2. Inflation rate and appears to lag money growth.

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3. Demand deposits are shrinking as a total percentage of M1. However, it appears that the component “other demand deposits” does not become important as a percentage until the late 1970s. Since the currency component increases over this period and the traveler’s checks are negligible, total deposits included in M1 have been shrinking as a share. This does not mean that currency has become a more important or larger part of the money supply. We need to look at M2 first 4. Holdings of money are moving from M1 to M2. Money markets become important and CDs les s so. Savings accounts increase from the 1980s level. This probably is due to the change in liquidity and interest over time.

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Unformatted text preview: M1 as a share of M2 has been falling, this combined with the previous chart implies liquid deposits are becoming a less important component of the money supply. 5. Lex ‘s payment can be solved using the following formula for a fixed monthly payment 30 year loan : In excel FP = PMT(.065/12,12*30,-200000) 6. Current yield can be found by solving for Yield to maturity can be found by solving for excel formula RATE(5,75,-980,1000) = 8% 7. Yield to maturity can be found by solving for excel formula RATE(30*12,1300,-190000)*12 =7.28% 8. The APY can be found by solving for where is the nominal interest rate and is the number of compounding periods a year. Option Nominal Rate Period s APY Year End Balance 1 5.00% 1 5.00% \$127628.2 2 4.95% 2 5.01% \$127696.6 3 4.90% 4 4.99% \$127572.1 4 4.85% 12 4.96% \$127380.9...
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## This note was uploaded on 05/13/2010 for the course ECON 323 taught by Professor Jakes during the Spring '10 term at Alcorn State.

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hw1_ans - M1 as a share of M2 has been falling this...

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