BUS051 HW14 - Sharon Ng Professor Henderson BUS051 20 July...

Sharon Ng
Professor Henderson
BUS051
20 July 2011
Lesson 14 Homework
Amy Mendoza, a Minnesota native, has recently been elected to the U.S. House of
Representatives. Amy, a long-time college professor, was elected on a platform of educational
reform. Somehow, Amy finds herself appointed to the Joint Economic and Financial Services
Committees. Amy is having a hard time understanding the testimony before each committee, but
is hesitant to ask too many questions.
1. On his first day, there is a discussion of M-1 and M-2. Amy doesn't have a clue what they are
talking about. Explain M-1 and M-2.
Answer: M-1 is the measure of the money supply that only includes the most liquid (spendable)
forms of money. M-2 is a measure of the money supply that includes all the components of M-1
plus the forms of money that can be easily converted to spendable forms.
2. Several days later, there is discussion of a bill raising insurance on bank deposits. Explain to
Amy who insures bank deposits and the current limit.