Answer to Question #8527 in Finance for Joan

Question

Following are components of the M1 money suppy at the endof 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 travelers's checks stays the same?

Answer 1

M1= The total of all physical currency part of bank reserves + the amount in demand accounts ("checking" or "current" accounts).
The size of the M1 money supply at the end of next year will be:
M1= The total of all physical currency part of bank reserves*1,1 + demand deposits*1,05+ other checkable deposits*1,08