Krug2e Macro PS CH14


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S187-S198_Krug2e_Macro_PS_Ch14.qxp 2/25/09 8:02 PM Page S-198
Solution
16.
a.
The drop in new housing starts in 19841991 was caused by the unavailability of
easy mortgage financing resulting from the Savings and Loans (S&L) crisis. S&Ls
had invested in overly risky real estate assets, and many of them failed. As the gov-
ernment closed over 1,000 S&Ls, mortgages became less easily available, and new
housing starts dropped dramatically.
b.
The drop in new housing starts in 20062008 was caused by the unavailability of
easy mortgage financing that precipitated the 2008 financial crisis. When many
homeowners who had financed their homes at subprime lending rates defaulted on
their mortgages, those financial institutions that had invested in securitized sub-
prime loans got into financial trouble and restrictedor stoppedlending.
c.
Better regulation of the S&Ls could have prevented them from investing in risky
real estate assets, preventing their collapse. Similarly, better regulation of financial
institutions that purchased securitized subprime loans could have prevented those
institutions from failing.
MONEY,BANKING,AND THE FEDERAL RESERVE SYSTEM
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Solution
15.
As shown in Figure 30-9, on September 5, 2007, about 90% of the Federal Reserves
assets were made up of U.S. Treasury bills. However, on September 3, 2008, only 53%
of the Federal Reserves assets were made up of U.S. Treasury bills. Go to www.federal-
reserve.gov. Under Recent Statistical Releases, click on All Statistical Releases.
Under the heading Money Stock and Reserve Balances, click on Factors Affecting
Reserve Balances. Click on the date of the current release.
a.
Under 5. Statement of Condition of Each Federal Reserve Bank, look in the
Total column. What is the amount displayed next to Assets? What is the
amount displayed next to U.S. Treasury? What percentage of the Federal
Reserves total assets are currently made up of U.S. Treasury bills?
b.
Do the Federal Reserves assets consist primarily of U.S. Treasury securities, as on
September 5, 2007, which was a fairly typical day, or does the Fed still own a large
number of other assets, as it did on September 3, 2008, when it was responding to
a crisis on Wall Street?
15.
a.
Answers will vary. As of data released on September 11, 2008, the Feds assets were
$924,865 million, and U.S. Treasury holdings were $479,782 million; 52%
(479,782/924,865

100) of the Feds total assets were made up of U.S. Treasury
securities.
b.
As of September 11, 2008, the Federal Reserve still owned a large number of other
assets, and the Feds balance sheet had not yet returned to normal.
16.
The accompanying figure shows new U.S. housing starts, in thousands of units per
month, between January 1980 and September 2008. The graph shows a large drop in
new housing starts in 19841991 and 20062008. New housing starts are related to
the availability of mortgages.
a.
What caused the drop in new housing starts in 19841991?
b.
What caused the drop in new housing starts in 20062008?
c.
How could better regulation of financial institutions have prevented these two
instances?
2,400
2,200
2,000
1,
8
00
1,600
1,400
1,200
1,000
8
00
New housing
sta
r
ts
(thousands)
Yea
r
1
98
0
1
98
5
1
99
0
1
99
5
2000
2005
200
8
Source:
Federal Reserve Bank of St. Louis.
S-196
MACROECONOMICS,
CHAPTER 14
ECONOMICS,
CHAPTER 30
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Solution
Solution
13.
When the Federal Reserve sells $30 million in Treasury bills to commercial banks, its
assets decrease by $30 million (it now owns $30 million less in Treasury bills), but its
liabilities also decrease by $30 million as the banks pay the Federal Reserve for the
Treasury bills from their accounts at the Fed (part of the monetary base). From the
perspective of commercial banks, their assets rise by $30 million because they buy the
Treasury bills from the Fed, but their assets also fall by $30 million when they pay for
the Treasury bills from their deposits at the Fed (their reserves).
Initial changes to the T-account of the Federal Reserve immediately after the Fed sale
of $30 million in Treasury bills:
Initial changes to the T-account of commercial banks immediately after the Fed sale
of $30 million in Treasury bills:
After the Federal Reserve sells $30 million in Treasury bills, the banks are no longer
holding enough reserves to support their deposits. The banks will need to reduce loans
and deposits by $600 millionthe amount of deposits that were supported by the $30
million in reserves used to buy the Treasury bills. So the money supply will also
decrease by $600 million.
All changes to the T-account of commercial banks after the Fed sale of $30 million in
Treasury bills:
14.
The Congressional Research Service estimates that at least $45 million of counterfeit
U.S. $100 notes produced by the North Korean government are in circulation.
a.
Why do U.S. taxpayers lose because of North Koreas counterfeiting?
b.
As of September 2008, the interest rate earned on one-year U.S. Treasury bills was
2.2%. At a 2.2% rate of interest, what is the amount of money U.S. taxpayers are
losing per year because of these $45 million in counterfeit notes?
14.
a.
When North Korea circulates fake currency, the Federal Reserve does not hold any
assets, and the U.S. government does not get the interest from the Treasury bills it
would have gotten if it had printed the notes. The cost of counterfeiting is the
interest forgone on U.S. Treasury bills that the U.S. government would receive from
legally printed $100 notes. U.S. taxpayers lose because the government does not get
this interest.
b.
The amount of interest forgone per year is 2.2%

$45 million
=
$990,000.
AssetsLiabilities
Treasury bills
+
$30 millionCheckable deposits

$600 million
Reserves

$30 million
Loans

$600 million
AssetsLiabilities
Treasury bills
+
$30 millionNo change
Reserves

$30 million
AssetsLiabilities
Treasury bills

$30 millionMonetary base

$30 million
MONEY,BANKING,AND THE FEDERAL RESERVE SYSTEM
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Solution
Solution
11.
Answers will vary depending on where you live and when you look up your answer. If
you live in Reedley, California, in September 2008, you were in the San Francisco district
of the Federal Reserve system. Janet Yellen was the president of the Federal Reserve Bank
of San Francisco and an alternate (nonvoting) member of the FOMC at that time.
12.
Show the changes to the T-accounts for the Federal Reserve and for commercial banks
when the Federal Reserve buys $50 million in U.S. Treasury bills. If the public holds a
fixed amount of currency (so that all loans create an equal amount of deposits in the
banking system), the minimum reserve ratio is 10%, and banks hold no excess
reserves, by how much will deposits in the commercial banks change? By how much
will the money supply change? Show the final changes to the T-account for commer-
cial banks when the money supply changes by this amount.
12.
When the Federal Reserve buys $50 million in Treasury bills from commercial banks, its
assets increase by $50 million (it now owns $50 million in Treasury bills) but its liabili-
ties also increase by $50 million as it credits the banks accounts at the Federal Reserve,
part of the monetary base. From the perspective of commercial banks, their assets fall by
$50 million because they sell Treasury bills to the Fed, but their assets also rise by $50
million when their deposits at the Fed (reserves) are credited with $50 million.
Initial changes to the T-account of the Federal Reserve immediately after the Fed pur-
chase of $50 million in Treasury bills:
Initial changes to the T-account of commercial banks immediately after the Fed pur-
chase of $50 million in Treasury bills:
After the Federal Reserve buys $50 million from commercial banks, the banks are
holding $50 million in excess reserves. Since the banks do not want to hold any excess
reserves, they will increase loans and deposits by $500 million, the maximum amount
that $50 million in reserves can support. Therefore, the money supply will also
increase by $500 million.
Total changes to the T-account of commercial banks after the Fed purchase of
$50 million in Treasury bills:
13.
Show the changes to the T-accounts for the Federal Reserve and for commercial banks
when the Federal Reserve sells $30 million in U.S. Treasury bills. If the public holds a
fixed amount of currency (so that all new loans create an equal amount of checkable
bank deposits in the banking system) and the minimum reserve ratio is 5%, by how
much will checkable bank deposits in the commercial banks change? By how much
will the money supply change? Show the final changes to the T-account for the com-
mercial banks when the money supply changes by this amount.
AssetsLiabilities
Treasury bills

$50 millionCheckable deposits
+
$500 million
Reserves
+
$50 million
Loans
+
$500 million
AssetsLiabilities
Treasury bills

$50 millionNo change
Reserves +$50 million
AssetsLiabilities
Treasury bills +$50 millionMonetary base +$50 million
S-194
MACROECONOMICS,
CHAPTER 14
ECONOMICS,
CHAPTER 30
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Solution
Solution
9.
What will happen to the money supply under the following circumstances in a
checkable-deposits-only system?
a.
The required reserve ratio is 25%, and a depositor withdraws $700 from his check-
able bank deposit.
b.
The required reserve ratio is 5%, and a depositor withdraws $700 from his check-
able bank deposit.
c.
The required reserve ratio is 20%, and a customer deposits $750 to her checkable
bank deposit.
d.
The required reserve ratio is 10%, and a customer deposits $600 to her checkable
bank deposit.
9.
a.
Checkable deposits contract by $2,800, but $700 is converted into currency held by
the public. The money supply contracts by $2,100.
b.
Checkable deposits contract by $14,000, but $700 is converted into currency held
by the public. The money supply contracts by $13,300.
c.
Checkable deposits expand by $3,750, but currency in circulation falls by $750.
The money supply expands by $3,000.
d.
Checkable deposits expand by $6,000, but currency in circulation falls by $600.
The money supply expands by $5,400.
10.
Although the U.S. Federal Reserve doesnt use changes in reserve requirements to
manage the money supply, the central bank of Albernia does. The commercial banks
of Albernia have $100 million in reserves and $1,000 million in checkable deposits;
the initial required reserve ratio is 10%. The commercial banks follow a policy of
holding no excess reserves. The public holds no currency, only checkable deposits in
the banking system.
a.
How will the money supply change if the required reserve ratio falls to 5%?
b.
How will the money supply change if the required reserve ratio rises to 25%?
10.
a.
If the required reserve ratio falls to 5%, the commercial banks of Albernia will be
holding $50 million in excess reserves. Since the banks follow a policy of holding
no excess reserves, the banks will expand deposits by making loans. The banks
reserves of $100 million will support $2,000 million in deposits at a reserve ratio
of 5%. The bank will expand loans and deposits by $1,000 million; so the money
supply expands by $1,000 million.
b.
If the required reserve ratio rises to 25%, the commercial banks of Albernia will not
be holding enough reserves to support $1,000 million in deposits. The banks
reserves will only support $400 million in deposits. The commercial banks will
have to decrease loans and deposits by $600 million; so the money supply will con-
tract by $600 million.
11.
Using Figure 30-6, find the Federal Reserve district in which you live. Go to
http://www.federalreserve.gov/bios/pres.htm and click on your district to identify the
president of the Federal Reserve Bank in your district. Go to http://www.federal
reserve.gov/fomc/ and determine if the president of the Fed is currently a voting
member of the Federal Open Market Committee (FOMC).
MONEY,BANKING,AND THE FEDERAL RESERVE SYSTEM
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Solution
8.
In Westlandia, the public holds 50% of M1 in the form of currency, and the required
reserve ratio is 20%. Estimate how much the money supply will increase in response
to a new cash deposit of $500 by completing the accompanying table. (
Hint:
The first
row shows that the bank must hold $100 in minimum reserves20% of the $500
depositagainst this deposit, leaving $400 in excess reserves that can be loaned out.
However, since the public wants to hold 50% of the loan in currency, only $400

0.5
=
$200 of the loan will be deposited in round 2 from the loan granted in round 1.)
How does your answer compare to an economy in which the total amount of the loan
is deposited in the banking system and the public doesnt hold any of the loan in cur-
rency? What does this imply about the relationship between the publics desire for
holding currency and the money multiplier?
8.
As shown in the accompanying table, after 10 rounds, loans can expand by $666.60;
this is also the increase in the money supply at this point. (Although deposits increase
by $833.25, currency held by the public falls by $166.70it initially fell by $500 and
eventually rose again by $333.30.) If the total amount of each loan is deposited in the
banking system (that is, the public does not hold any of the loans in currency), the
money supply would increase by $2,000 ($500/0.2

$500); deposits would increase
by $2,500. The money multiplier decreases in size as the public holds a greater per-
centage of loans in currency.
RequiredExcessHeld as
RoundDepositsreservesreservesLoanscurrency
1$500.00 $100.00 $400.00 $400.00 $200.00
2200.00 40.00 160.00 160.00 80.00
380.00 16.00 64.00 64.00 32.00
432.00 6.40 25.60 25.60 12.80
512.80 2.56 10.24 10.24 5.12
65.12 1.02 4.10 4.10 2.05
72.05 0.41 1.64 1.64 0.82
80.82 0.16 0.66 0.66 0.33
90.33 0.07 0.26 0.26 0.13
100.13 0.03 0.10 0.10 0.05
Total after
10 rounds$833.25$166.65$666.60$666.60$333.30
RequiredExcess Held as
RoundDepositsreservesreservesLoanscurrency
1$500.00 $100.00 $400.00 $400.00 $200.00
2200.00 ????
3?????
4?????
5?????
6?????
7?????
8?????
9?????
10?????
Total after
10 rounds?????
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MACROECONOMICS,
CHAPTER 14
ECONOMICS,
CHAPTER 30
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Solution
b.
Assuming that the bank has other checkable deposits, the bank will be holding
insufficient reserves. The bank was holding $40 of the $400 withdrawal as required
reserves for the $400 deposit; however, the remaining $360 was being held as
required reserves for other deposits. The bank will have to reduce its deposits by
$3,600 ($360/0.1) to reduce its required reserves by $360 (10% of $3,600) in
order to maintain the required reserve ratio of 10%.
c.
The money supply will contract by $3,600 (

$400/0.1
+
$400). Checkable deposits
fall by $4,000, but only $3,600 represents a decrease in the money supply because
$400 of the $4,000 fall in checkable deposits has been converted into cash in
Ryans wallet.
d.
The money supply can decrease by $1,600 (

$400/0.2
+
$400). Checkable deposits
fall by $2,000, but only $1,600 represents a decrease in the money supply.
7.
The government of Eastlandia uses measures of monetary aggregates similar to
those used by the United States, and the central bank of Eastlandia imposes a
required reserve ratio of 10%. Given the following information, answer the ques-
tions below.
Bank deposits at the central bank
=
$200 million
Currency held by public
=
$150 million
Currency in bank vaults
=
$100 million
Checkable bank deposits
=
$500 million
Travelers checks
=
$10 million
a.
What is M1?
b.
What is the monetary base?
c.
Are the commercial banks holding excess reserves?
d.
Can the commercial banks increase checkable bank deposits? If yes, by how much
can checkable bank deposits increase?
7.
a.
M1 equals the sum of currency held by the public ($150 million), checkable
deposits ($500 million), and travelers checks ($10 million), or $660 million.
b.
The monetary base is the sum of currency held by the public ($150 million) and
the reserves of the commercial banks [currency in bank vaults ($100 million) and
bank deposits at the central bank ($200 million)]. The monetary base is $450
million.
c.
Required reserves are $50 million (10% of $500 million). Because total reserves are
$300 million [currency in bank vaults ($100 million) plus bank deposits at the
central bank ($200 million)], the commercial banks are holding $250 million
($300 million

$50 million) in excess reserves.
d.
Since the commercial banks are holding excess reserves, they can increase deposits.
With a required reserve ratio of 10%, reserves of $300 million can support a total
of $3,000 million ($300/0.1) in deposits. Commercial banks can increase deposits
by an additional $2,500 million.
MONEY,BANKING,AND THE FEDERAL RESERVE SYSTEM
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Solution
Solution
c.
If every time the bank makes a loan, the loan results in a new checkable bank
deposit in a different bank equal to the amount of the loan, by how much could
the total money supply in the economy expand in response to Tracys initial cash
deposit of $500?
d.
If every time the bank makes a loan, the loan results in a new checkable bank
deposit in a different bank equal to the amount of the loan and the bank main-
tains a reserve ratio of 5%, by how much could the money supply expand in
response to an initial cash deposit of $500?
5.
a.
Initially, the banks reserves rise by $500, as do its checkable deposits. There is no
initial change in the money supply; currency in circulation has fallen by $500 but
checkable deposits have increased by $500.
b.
The bank will hold $50 as reserves against the new deposit and make additional
loans equal to $450.
c.
The money supply can expand by $4,500. When Tracy deposits $500, the bank now
holds $450 in excess reserves. This will ultimately lead to an increase in the money
supply of $450/0.1
=
$4,500.
d.
The money supply can expand by $9,500. When Tracy deposts $500, the bank now
holds $475 in excess reserves. This will ultimately increase the money supply by
$475/0.05
=
$9,500.
6.
Ryan Cozzens withdraws $400 from his checking account at the local bank and keeps
it in his wallet.
a.
How will the withdrawal change the T-account of the local bank and the money
supply?
b.
If the bank maintains a reserve ratio of 10%, how will the bank respond to the
withdrawal? Assume that the bank responds to insufficient reserves by reducing the
amount of deposits it holds until its level of reserves satisfies its required reserve
ratio. The bank reduces its deposits by calling in some of its loans, forcing borrow-
ers to pay back these loans by taking cash from their checking deposits (at the
same bank) to make repayment.
c.
If every time the bank decreases its loans, checkable bank deposits fall by the
amount of the loan, by how much will the money supply in the economy contract
in response to Ryans withdrawal of $400?
d.
If every time the bank decreases its loans, checkable bank deposits fall by the
amount of the loan and the bank maintains a reserve ratio of 20%, by how much
will the money supply contract in response to a withdrawal of $400?
6.
a.
Initially, the banks reserves fall by $400, as do its checkable deposits. There is no
initial change in the money supply; currency in circulation has risen by $400 but
checkable deposits have decreased by $400.
AssetsLiabilities
Reserves

$400Checkable Deposits

$400
AssetsLiabilities
Reserves +$500Checkable Deposits +$500
S-190
MACROECONOMICS,
CHAPTER 14
ECONOMICS,
CHAPTER 30
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Solution
4.
Indicate whether each of the following is part of M1, M2, or neither:
a.
$95 on your campus meal card
b.
$0.55 in the change cup of your car
c.
$1,663 in your savings account
d.
$459 in your checking account
e.
100 shares of stock worth $4,000
f.
A $1,000 line of credit on your Sears credit card
4.
a.
$95 on your campus meal card is similar to a gift certificate. Because it can only be
used for one purpose, it is not part of either M1 or M2.
b.
$0.55 in the change cup of your car is part of currency in circulation; it is part of
both M1 and M2.
c.
$1,663 in your savings account isnt directly usable as a medium of exchange, so it
is not part of M1; but because it can readily be converted into cash or checkable
deposits, it is part of M2.
d.
A $459 balance in your checking account is part of both M1 and M2; it represents
a checkable deposit.
e.
100 shares of stock are not part of either M1 or M2. Although an asset, stock is
not a highly liquid asset.
f.
A $1,000 line of credit on your Sears credit card account is not part of either M1 or
M2 because it does not represent an asset.
5.
Tracy Williams deposits $500 that was in her sock drawer into a checking account at
the local bank.
a.
How does the deposit initially change the T-account of the local bank? How does it
change the money supply?
b.
If the bank maintains a reserve ratio of 10%, how will it respond to the new
deposit?
MONEY,BANKING,AND THE FEDERAL RESERVE SYSTEM
S-189
CurrencyCurrency
Timeinin
depositscirculationcirculation
CurrencyMoneysmalleras aas a
Yearcirculationchecksdepositsfunds$100,000depositsM1M2of M1of M2
(billions of dollars)
1998$460.5$8.5$626.5$728.9$952.4$1,605.0$1,095.5$4,381.842.0%10.5%
1999517.88.6596.2819.7956.81,740.31,122.64,639.446.111.2
2000531.28.3548.0908.01,047.61,878.81,087.54,921.948.810.8
2001581.28.0592.6962.3976.52,312.81,181.85,433.449.210.7
2002626.37.8585.6885.3896.02,778.21,219.75,779.251.310.8
2003662.57.7635.9777.4818.73,169.11,306.16,071.350.710.9
2004697.67.5671.2697.1829.93,518.31,376.36,421.650.710.9
2005723.97.2643.4699.9995.83,621.41,374.56,691.652.710.8
2006748.96.7611.4799.41,170.43,698.61,367.07,035.454.810.6
2007759.06.3599.2976.11,216.83,889.81,364.57,447.255.610.2
Source:
2008 Economic Report of the President.
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Solution
Solution
S-188
MACROECONOMICS,
CHAPTER 14
ECONOMICS,
CHAPTER 30
2.
a.
A bottle of rum is commodity money since the rum has other uses.
b.
Salt is commodity money since it has other uses.
c.
The Rye Mark is commodity-backed money since its ultimate value is guaranteed
by a promise that it can be converted into valuable goods (rye grain).
d.
Ithaca HOURS are fiat money because their value derives entirely from their status
as a means of payment in Ithaca.
3.
The table below shows the components of M1 and M2 in billions of dollars for the
month of December in the years 1998 to 2007 as published in the 2008 Economic
Report of the President. Complete the table by calculating M1, M2, currency in circu-
lation as a percentage of M1, and currency in circulation as a percentage of M2. What
trends or patterns about M1, M2, currency in circulation as a percentage of M1, and
currency in circulation as a percentage of M2 do you see? What might account for
these trends?
3.
In the completed table that follows, M1 consists of currency in circulation, travelers
checks, and checkable deposits. M2 consists of M1 plus money market funds, time
deposits, and savings deposits. From 1998 to 2007, there is no obvious trend in M1.
Over the entire period, M1 grew by $269 billion (or 25%) but was essentially stable
from 2004 to 2007; all of this growth occurred between 1998 and 2004. There is,
however, a clear upward trend throughout the period for M2, which grew by $3,065
billion (or 70%) from 1998 to 2007. Currency as a percentage of M1 grew from
42.0% to over 55% from 1998 to 2007, but currency as a percentage of M2 remained
relatively constant, varying from a low of 10.2% in 2007 to a high of 11.2% in 1999.
The increase in currency as a percentage of M1 could reflect increased use of credit
cards, with a corresponding reduction in the importance of travelers checks and
checkable deposits. Yet, since currency as a percentage of M2 did not change, it could
also reflect a shift from checkable deposits to money market funds, time deposits, and
savings deposits.
CurrencyCurrency
Time in in
deposits circulationcirculation
Currency Moneysmaller as a as a
Yearcirculationchecksdepositsfunds$100,000depositsM1M2of M1of M2
(billions of dollars)
1998$460.5$8.5$626.5$728.9$952.4$1,605.0????
1999517.88.6596.2819.7956.81,740.3????
2000531.28.3548.0908.01,047.61,878.8????
2001581.28.0592.6962.3976.52,312.8????
2002626.37.8585.6885.3896.02,778.2????
2003662.57.7635.9777.4818.73,169.1????
2004697.67.5671.2697.1829.93,518.3????
2005723.97.2643.4699.9995.83,621.4????
2006748.96.7611.4799.41,170.43,698.6????
2007759.06.3599.2976.11,216.83,889.8????
Source:
2008 Economic Report of the President.
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Solution
S-187
chapter:
Money, Banking, and the Federal
Reserve System
1.
For each of the following transactions, what is the initial effect (increase or decrease)
on M1? or M2?
a.
You sell a few shares of stock and put the proceeds into your savings account.
b.
You sell a few shares of stock and put the proceeds into your checking account.
c.
You transfer money from your savings account to your checking account.
d.
You discover $0.25 under the floor mat in your car and deposit it in your checking
account.
e.
You discover $0.25 under the floor mat in your car and deposit it in your savings
account.
1.
a.
Shares of stock are not a component of either M1 or M2, so holding fewer shares
does not decrease either M1 or M2. However, depositing the money into your sav-
ings account increases M2, since the savings account is part of M2 (but not part of
M1). M1 does not change.
b.
Shares of stock are not a component of either M1 or M2, and so holding fewer
shares does not decrease either M1 or M2. However, depositing the money into
your checking account increases M1, since checking accounts are part of M1. It
also increases M2, since M1 is part of M2.
c.
Moving money from savings to checking has no effect on M2, since both savings
accounts and checking accounts are included in M2. However, since savings
accounts are not part of M1, moving money from savings to checking does
increase M1.
d.
Depositing cash into a checking account does not change M1 or M2. You are sim-
ply transferring money from one component of M1 (currency in circulation) to
another component of M1 (checkable deposits).
e.
Depositing $0.25 into your savings account has no effect on M2, since both sav-
ings accounts and currency in circulation are in M2. However, since savings
accounts are not part of M1, depositing the $0.25 into your savings account
reduces M1.
2.
There are three types of money: commodity money, commodity-backed money, and
fiat money. Which type of money is used in each of the following situations?
a.
Bottles of rum were used to pay for goods in colonial Australia.
b.
Salt was used in many European countries as a medium of exchange.
c.
For a brief time, Germany used paper money (the Rye Mark) that could be
redeemed for a certain amount of rye, a type of grain.
d.
The town of Ithaca, New York, prints its own currency, the Ithaca HOURS, which
can be used to purchase local goods and services.
3014
ECONOMICS
MACROECONOMICS
S187-S198_Krug2e_Macro_PS_Ch14.qxp 2/25/09 8:02 PM Page S-187

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