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ECON 214 SET 4 ECON214 SET 4

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1. What determines whether a financial asset is included in the M1 money supply? Why are interest-earning checkable deposits included in M1, whereas interest-earning savings accounts and Treasury bills are not? 

2. Why are banks able to maintain reserves that are only a fraction of the demand and savings deposits of their customers? Is your money safe in a bank? Why or why not? 

3. How would the following influence the growth rates of the M1 and M2 money supply figures over time?

a. An increase in the quantity of U.S. currency held overseas.

b. A shift of funds from interest-earning checking deposits to money market mutual funds.

c. A reduction in the holdings of currency by the general public because debit cards have become more popular and widely accepted. 

d. The shift of funds from money market mutual funds into stock and bond mutual funds because the fees to invest in the latter have declined. 

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[Solved] ECON 214 SET 4 ECON214 SET 4

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1. What determines whether a financial asset is included in the M1 money supply? Why are interest-earning checkable deposits included in M1, whereas interest-earning savings accounts and Treasury bills are not?  2. Why are banks ...
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