Anonymous asked in 商業及金融其他 - 商業及金融 · 1 decade ago

Econ Question about M1 M2 M3

Assets (million) Liabilities (million)

Reserve $250 Deposits $1,000

Loans $750

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


2 Answers

  • S™
    Lv 5
    1 decade ago
    Favorite 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.

  • 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

    contraction .

    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

    M2= +0.5million

    M1 no change

    條問題怪怪的 ....

    Source(s): me
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