Econ Question about M1 M2 M3
Assets (million) Liabilities (million)
Reserve $250 Deposits $1,000
Refer to the above table. Suppose Mr Lee withdraws $1 million from a deposit-taking company, then seposits $500,000 into a a licensed
bank as a time deposit and remits the remaining $500,000 to his
daughter in US. What are the changes in the M1, M2 and M3
- S™Lv 51 decade agoFavorite Answer
M1 = legal tender held by publics
+ demand deposit
M2 = M1
+ saving and time depositswith licensed banks
+ NCDs issued by licensed banks held by non-authorised
M3 = M2
+ deposits with restricted licensed banks and
deposit - taking companies
+ NCDs issued by restricted licensed banks and
deposits-taking companies held by non-authorised insititutions
M3 will decresed ↓by$500,000 immediately since mr lee remited the remaining $500,000 to his daughter in US.
M2 will incresed ↑by$500,000 because mr lee deposits $500,000 into a licensed bank as a time deposit which is included in M2.
M1 will not be affected.
2009-04-23 10:44:24 補充：
actually it has nothing to do with the banking system shown above
just refers to the question , you are required to calculate the money supply of M1 ,M2 & M3 respectively.
- 1 decade ago
First , I don't know the following answer is excally correct or not.
As , if you withdraw money from bank, there would be a deposit
But u don't have the legal reserve ratio of the bank..........
So, assume the bank has no excess reserve. XD
Required reserve ratio is 25%
After the withdraw , the bank has to call back loans (0.75million)
Max. decrease in deposit : 1+ 0.75(1/0.25)=4million
So, M3 =(-4+0.5)=-3.5million
M1 no change
條問題怪怪的 ....Source(s): me