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points eBook D References Use the following table to determine the levels of M1 and M2 in the United States. Money Categories in the United

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points eBook D References Use the following table to determine the levels of M1 and M2 in the United States. Money Categories in the United States Amount (billions of Asset dollars) Traveler's checks Instructions: Enter your answers as a whole number. a. Calculate the M1 money supply. $ billion b. Calculate the M2 money supply. $ billion 5 Suppose that Karen deposits $500 into her checking account at the bank. The reserve requirement for Karen's bank is 12%. Assume the bank does not want to hold any excess reserves of new deposits. 2 a. Use this information to complete the balance sheet below to show how the bank's assets and liabilities change when Karen deposits points the $500. Instructions: Enter your answers as a whole number. g A Simple Bank Balance Sheet eBook L Liabilities l Change in Reserves: $ _- Change in Deposits: % _- Refi - b. Why are deposits considered liabilities for a bank? O Deposits can be loaned out by the bank. ) The bank must hold deposits as reserves at the Federal Reserve. O Deposits can be withdrawn at any time. O The bank must pay interest on deposits. 4 Suppose that people in the economy are going to spend $4 million in the current period based on nominal GDP. The table shows the demand for money to be saved for future use at a variety of interest rates. 2 a. Use the information above to complete the "Transaction Demand" column and then complete the "Total Demand" column for this points economy. Instructions: Enter your answers as a whole number. eBook Total Demand for Money Transaction Asset Demand Demand Total Demand References Interest Rate (millions of (millions of millions of (percent) dollars) dollars) dollars 25% $0 $ $ 20 4 15 8 10 12 5 16 20 b. Graph the asset demand, transaction demand, and money demand curves. Instructions: Use the tools provided "Asset Demand," "Transaction Demand," and "Money Demand" to plot each line point by point (6 points total for each line). Demand for Money 30% Tools 25% O Transaction D Asset Demand 20% Money Demar Interest Rate (percent) 15% 10%

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