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Understanding and Calculating Different Levels of Money

Last updated 10 months ago
6 questions
Key Terms!

  • The monetary base, also known as "high-powered money" or "base money," consists of currency in circulation and reserves held by commercial banks at the central bank. The monetary base includes physical currency (coins and paper money) in the hands of the public and commercial bank reserves (both required and excess) held at the central bank.
  • The money supply consists of
1
  • Reserves
  • Checkable Deposits
  • Currency in Circulation
  • Monetary Base (MB)
  • M0 Supply (Sm)
1

Match the following for levels of money

Draggable itemCorresponding Item
Currency and Coin in Circulation
M0 Level of Money
Currency in Circulation and Bank Reserves
MB
M0 Level of Money plus Checkable Deposits
M1 Level of Money
M1 Level of Money plus savings accounts plus short-time deposits plus mutual funds
M2 Level of Money
1

Complete the table for the levels of money

M0
M1
M2
Medium of Exchange
Store of Value
Most Narrow Form of Money
Near Money
Most Liquid
Least Liquid
Put your answers in the following format. ($#,###)
NOTE: Non checkable savings deposits are deemed NOT liquid savings.
1

If the bank reserves are $1000, then what is the monetary base?

1

What is the M0 money supply?

1

What is the M1 money supply?