Item

Small Time Deposits

Billions of
Dollars
$ 630

Large Time Deposits

645

Money Market deposit accounts

575

Money Market mutual funds

425

Checkable deposits

448

Non-checkable savings deposits

300

Coins and Currency

170

Item
Small Time Deposits

Billions of
Dollars
$ 500

Large Time Deposits

550

Money Market deposit accounts

600

Money Market mutual funds

400

Checkable deposits

350

Non-checkable savings deposits

300

Coins and Currency

100

Item
Small Time Deposits

Billions of
Dollars
$ 200

Large Time Deposits

300

Money Market deposit accounts

350

Money Market mutual funds

150

Checkable deposits

500

Non-checkable savings deposits

250

Coins and Currency

M1 is equal to the sum of $____________ and $____________, so it totals

$____________ billion.
M2 is equal to M1 plus $____________ and $____________ and
$____________ and $____________, so it totals and $____________ billion.

M1 equals $____________ billion.

M2 equals $____________ billion.

M1 equals $____________ billion.

M2 equals $____________ billion.

50

M1 = _____________________ plus _____________________

M2 = _________________ plus _______________________ plus _______________________ plus _______________________ plus
_______________________.

The table shows the number of dollars demanded for asset purposes at each rate of interest. Given the transactions demand for money,
complete the table.
1.

Suppose the transactions demand for money is equal to 10% of nominal GDP, the supply of
money is $300 billion, and the asset demand for money is as shown in the table. If the
nominal GDP is $2,000 billion, the equilibrium interest rate is
a. 14%
b. 12%
c. 10%
d.
8%

2.

If the nominal GDP remains constant, an increase in the money supply from $300 billion to
$350 billion would cause the equilibrium interest rate to
a. rise to 12%
b. rise to 14%
c. fall to 6%
d. remain unchanged

3.

On the graph below, plot the total demand for money (Dm) at each interest rate.

4.

Assume the money supply (Sm) is $375 billion, plot this money supply on the graph.
a.

Interest
rate

Amount of money
demanded (billions)
For asset
purposes

14%
12%
10%
8%
6%
4%
2%

Total

$50
75
100
125
150
175
200

The equilibrium rate of interest is ______%

5.

If the money supply increases to $400 billion, the equilibrium interest rate would (rise, fall) ___________ to ____%

6.

If the money supply decreased to $275 billion, the equilibrium interest rate would (rise, fall) ______ to ___%

7.

Assuming the data from question , and the supply of money remains $300 billion
a.

if the nominal GDP increased by $500 billion, the total demand for money would (rise, fall) _________ by $_______ billion
at each rate of interest and the equilibrium rate of interest would be ___ %

b.

if the nominal GDP decreased by $500 billion, the total demand for money would (rise, fall) _________ by $_______ billion
at each rate of interest and the equilibrium rate of interest would be ___ %

16%
14%
12%
10%
8%
6%
4%
2%

200 225 250 275 300 325 350 375 400 425 450
8.

The total demand for money is equal to the transactions demand plus the asset demand for money. Assume each dollar held for
transactions purposes is spent (on average) five times per year to buy final goods and services. This means that transactions demand
for money will be equal to (what fraction or percent) ______________ of the nominal GDP, and, if the nominal GDP is $2,000 billion,
the transactions demand will be $___________ billion.