Chapter 3, Problem 19AP

To determine

(a)

The value of money supplies M1 and M2 and their rates of growth for the given years.

Introduction:

M1 is a form of money supply measure which includes all the money equivalents which can easily be converted either into cash or money or are already available in the form of coins or notes.

M2 refers to the broader measure of money supply as it includes all the components of M1 and all the short term deposits with banks and also the 24-hour market funds.

To determine

(b)

The reason ofthe difference between the growth rates of M1 and M2.

Introduction:

M1 is the form of money supply measure which includes all the money equivalents which can easily be converted either into cash or money or are already available in the form of coins or notes.

M2 refers to the broader measure of money supply as it includes all the components of M1 and all the short term deposits with banks and also the 24-hour market funds.