Chapter 3, Problem 2DAP

To determine

The small-denomination time deposits, savings deposits and money market deposit accounts and retail money market funds from the St. Louis Federal Reserve FRED database and to calculate the percentage change of these three items of M2 for the most recent month data and compare with same one year prior. To determine the item having the highest growth rate and the item having the lowest growth rate, to calculate and compare the data from January 2000 to the most recent month data and to determine which item grew faster the M1 money supply ( from the previous question) or non-M1 items of M2.

Concept Introduction:

Money supply − Money supply refers to the monetary aggregate that goes beyond monetary base including other assets which could be less liquid in form.

M1 Money supply includes most liquid part of the money supply including physical currencies such as notes, coins, demand drafts, traveler’s checks, checkable deposits.

M2 Money supply includes along with M1, the mutual funds, time deposits and saving deposits. In comparison to M1, M2 Money supply is less liquid.