Figure 5: 2020 Monetary data from the School of Monetary, University of the LOVE

Monetary item Values

Notes and coins in circulation $5 millions

All the notes and coins issued by the central bank $7 millions

Demand deposits $12 millions

Short-term deposits (less than 6 months) $20 millions

Long-term deposits (more than 6 months) $36 million

Consumer credit card outstanding balances $15 millions

Estimated velocity of circulation 150 times a year

Estimated quantity of money $20 millions

Price index at year 2020 125

Estimated currency drain ratio 0.25

Estimated desired reserve ratio 0.15

Use the 2020 Monetary data from the School of Monetary from the University of the LOVE

to answer the following questions:

a. Calculate M1. (2 Marks)

b. Calculate M2. (2 Marks)

c. Use the theory of the quantity theory of money to calculate the real GDP for the LOVE

Republic. (2 Marks)

d. Calculate and interpret the money multiplier for the LOVE Republic (3 Marks)