In June 2013 , currency held by individuals and businesses...

In June 2013 , currency held by individuals and businesses was $\$ 1,124$ billion; traveler's checks were $\$ 4$ billion; checkable deposits owned by individuals and businesses were $\$ 1,402$ billion; savings deposits were $\$ 6,884$ billion; time deposits were $\$ 583$ billion; and money market funds and other deposits were $\$ 647$ billion. Calculate $\mathrm{M} 1$ and $\mathrm{M} 2$ in June 2013

Key Concepts

M2 is a broader classification that includes all the components of M1 along with additional types of deposits such as savings deposits, time deposits, and money market funds. These additional components may not be as liquid as M1 but are still relatively accessible. M2 offers a more comprehensive picture of the money supply, capturing both immediate transactional funds and assets that can be converted into cash with minimal delay.

Monetary Aggregates

Monetary aggregates are classifications of the total money supply within an economy, measured by grouping liquid assets based on their ease of use in transactions. These aggregates provide insight into how much money is circulating and available for spending or saving, which is critical for understanding economic activity and for crafting monetary policy.

M1 represents the most liquid components of the money supply. It includes currency in circulation, traveler's checks, and checkable deposits, all of which can be quickly and easily used for everyday transactions. This measure is closely monitored as it reflects the immediate spending power accessible to businesses and individuals.

Transcript

00:01 Hello students, so today we will discuss about the measures of money supply which are used in country you specifically measures of money supply which are specifically used in country you.

00:26 So in country you there are two official supply of measures and are known by the name m1 and m2.

00:36 Now let's understand what do these two means, m1 and m2.

00:40 So m1 is a narrow measure whereas m2 is broader in nature as compared to m1.

00:53 And m1 consists of money that like checkable deposits and currency which are held by an individual or businesses whereas it includes m1 whatever is included in m1.

01:10 So m1 includes checkable deposits.

01:22 And currency head.

01:30 So m2 includes these two along with other deposits and money market instruments and the money market mutual funds of individuals and business.

01:45 So along with this m2 includes other deposits.

01:49 I am representing this by od whereas the money market mutual funds of individuals.

01:55 So i am representing mutual funds of businesses and individuals.

02:02 So let's say we have been given a specific data and we have to compute m1 and m2 in a hypothetical situation, computation of m1 and m2.

02:23 Let's say we have values of individuals and businesses that wholly currency of value currency held by individuals i am representing by i and businesses by b for amount dollar, $1 ,1 ,24 billion...

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