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A Bank Has Checking Deposits of $400, Saving Deposits of $900

question 289

Essay

A bank has checking deposits of $400, saving deposits of $900, time deposits of $900, loans of $950, government securities of $900, outstanding credit card balances of $400, currency in its vault of $40, and deposits in its reserve account at the Fed of $40.
a) What is the amount of this bank's deposits that are in M1?
b) What is the amount of this bank's deposits that are in M2?
c) What is the amount of this bank's reserves?


Definitions:

Shut Down

A short-term decision by a firm to cease production due to market conditions, not covering variable costs in the short run.

Average Variable Cost

The total variable costs divided by the quantity of output produced.

Perfectly Competitive

A market structure characterized by many buyers and sellers, identical products, and free entry and exit, leading to price determination by supply and demand.

Market Price

The ongoing value for buying or selling a product or service in the free market.

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