Calculate M1 and M2.
Determine the total amounts of M1 and M2 based on the following data from July 2010:
Currency held by individuals and businesses was $921 billion.
Traveler’s checks were $7 billion.
Checkable deposits owned by individuals and businesses were $813 billion.
Savings deposits were $5,420 billion.
Small time deposits were $1,700 billion.
Money market funds and other deposits were $1,003 billion.
Analyze the effects of reserves and the money multiplier.
What do banks usually create when they possess excess reserves?
What factors limit the amount they can create?
As the required reserve ratio (R) increases and the currency drain ratio stays constant, does the money multiplier increase or decrease? Why?
Explain your reasoning.For more information on the effects of reserves check on this :https://en.wikipedia.org/wiki/Excess_reserves
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