Question

Following are components of the M1 money supply at the end of
last year. What will be the size of the M1 money supply at the end of
next year if currency grows by 10 percent, demand deposits grow by
5 percent, other checkable deposits grow by 8 percent, and the
amount of traveler’s checks stays the same?

Currency $700 billion
Demand deposits $300 billion
Other checkable deposits $300 billion
Traveler’s checks $10 billion

Answer 1

M1 = $700+$300+$300+$10 =$1310
M1next_year=$700*1,1+$300*1,05+$300*1,08+$10=$770+$315+$324+$10=$1419