The table to the right shows hypothetical values, in billions of dollars. Use the table to calculate the M1 and M2 money supply for each year. (Enter your responses rounded to the nearest dollar.) 2010 Total M1 Total M2 2009 2011 2012 A. Currency B. Money market mutual fund shares C. Saving account deposits D. Money market deposit accounts E. Demand and checkable deposits F. Small-denomination time deposits G. Traveler's checks H. 3-month Treasury bills 2009 2010 920 678 5,300 1,210 2011 2012 930 932 937 683 681 690 5,580 5,768 5,905 840 3 1,990 1,241 1,270 1,325 1,010 982 1,133 1,576 871 3 2 1 2,378 2,440 2,506 990 1,003

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Required Reserve and Excess Reserve Analysis

A required reserve is an amount of cash that banks must keep with themselves, which is certain percentage of the deposits made by their customers. Required reserve is a percentage of the bank's deposits that the respective bank must have on each overnight. The percentage rate is set and determined by the nation’s central bank. It is important to have such funds accumulated to meet its uncertain obligations, sudden liabilities and withdrawals. Required reserve is also known as reserve ratio. Reserve ratio is an important tool to control the money supply.