Table 9-2

-Refer to Table 9-2. In Year 2, if savings deposits had been $250 billion instead of $200 billion, M2 would have been
A) $575 billion.
B) larger by $50 billion.
C) smaller by $50 billion.
D) unaffected.

Question

Table 9-2
 
-Refer to Table 9-2. In Year 2, if savings deposits had been $250 billion instead of $200 billion, M2 would have been
A) $575 billion. 
B) larger by $50 billion. 
C) smaller by $50 billion. 
D) unaffected.

Quizplus · Accepted Answer

According to the table, in Year 2, the currency in circulation was $500 billion, savings deposits were $200 billion, small time deposits were $100 billion, and money market mutual funds were $25 billion. Therefore, M2 was $825 billion. If savings deposits had been $250 billion instead of $200 billion, then M2 would have been $875 billion (i.e. $500 billion + $250 billion + $100 billion + $25 billion). This is an increase of $50 billion from the original M2 level of $825 billion. Therefore, the correct answer is B.

Table 9-2 -Refer to Table 9-2. in Year 2, If Savings Deposits