Class Notes (836,277)
United States (324,407)
Economics (157)
ECON 0110 (84)
Lecture

Section 29 Notes.doc

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Department
Economics
Course
ECON 0110
Professor
K E N K E L
Semester
Spring

Description
SECTION 29: MEASURING THE MONEY SUPPLY Currency is printed by the Bureau of Engraving at the request of the Federal Reserve System. Currency is issued by the Federal Reserve System. Our dollar bills are FEDERAL RESERVE NOTES FEDERAL RESERVE NOTES are accepted because they are LEGAL TENDER MEASURING THE SUPPLY OF MONEY M1: (Money used for day to day transactions.) 1. Coins and currency held outside banks 2. Demand deposits 3. Traveler’s checks 4. Other checkable deposits The types of money included in M1 are HIGHLY LIQUID. They can easily and rapidly be transformed into cash. LIQUID ASSETS Assets that can be turned into cash rapidly and with little loss of value. M1 contains those portions of the money supply that are closely connected to current economic activity. Money included in M1 is related to money being used as a medium of exchange rather than money being used as a store of value. OTHER MEASURES OF THE MONEY SUPPLY M2 = M1 + money market fund shares + savings accounts less than $100,000 + small time deposits Small time deposits are certificates of deposit less than $100,000 M2 is less liquid than M1 M2 is partially used as a store of value M3 = M2 + large sav
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