Consider the following data from the economy of Adanac:
• Currency outside banks: $15 billion
• Personal and non- personal chequable deposits: $40 billion
• Personal non- chequable deposits: $50 billion
• Non- personal non- chequable deposits: $125 billion
• Fixed term deposits: $200 billion
The value of MI is $_______ billion and the value of M2 is $_______ billion.
A)55; 230
B)55; 430
C)110; 235
D)105; 230
E)60; 430

Question

Consider the following data from the economy of Adanac: 
• Currency outside banks: $15 billion
• Personal and non- personal chequable deposits: $40 billion
• Personal non- chequable deposits: $50 billion
• Non- personal non- chequable deposits: $125 billion
• Fixed term deposits: $200 billion
The value of MI is $_______ billion and the value of M2 is $_______ billion.
A)55; 230
B)55; 430
C)110; 235
D)105; 230
E)60; 430

Quizplus · Accepted Answer

MI (also known as monetary base) = currency outside banks + reserves of financial institutions at the central bank. 
MI = $15 billion + 0 (since there is no information about reserves) 
MI = $15 billion

M2 = MI + personal and non-personal chequable deposits + personal non-chequable deposits + non-personal non-chequable deposits + fixed term deposits 
M2 = $15 billion + $40 billion + $50 billion + $125 billion + $200 billion 
M2 = $430 billion

Consider the Following Data from the Economy of Adanac