Examkin

Soru

Zorluk: OrtaTypes and Supply of Money

Commercial bank customers in an economy decide to shift a substantial portion of their funds from checking accounts (demand deposits) into long-term fixed deposit accounts. What is the immediate effect of this transaction on narrow money supply (M1M_1) and broad money supply (M2M_2)?

  1. M1M_1 decreases while M2M_2 remains constantCevap
  2. B
    Both M1M_1 and M2M_2 decrease simultaneously
  3. C
    M1M_1 remains constant while M2M_2 increases
  4. D
    Both M1M_1 and M2M_2 increase simultaneously

Cevap

Narrow money supply (M1M_1) decreases while broad money supply (M2M_2) remains unchanged.
Narrow money (M1M_1) consists of currency outside banks and demand deposits. When depositors transfer funds from checking accounts to fixed time deposit accounts, demand deposits fall, causing M1M_1 to decrease. However, broad money (M2M_2) is defined as M1M_1 plus quasi-money (savings and time deposits). Because the drop in M1M_1 is exactly matched by an equal increase in quasi-money, the total value of M2M_2 remains constant.

Adım Adım Çözüm

1
Define narrow money (M1M_1) components
M1=Currency in Circulation+Demand DepositsM_1 = \text{Currency in Circulation} + \text{Demand Deposits}
Identify which monetary aggregate is affected by withdrawing funds from checking accounts.
2
Define broad money (M2M_2) components
M2=M1+Quasi-Money (Savings and Time Deposits)M_2 = M_1 + \text{Quasi-Money (Savings and Time Deposits)}
Understand how time deposits fit into broader monetary measures.
3
Analyze the net effect of the deposit transfer
Demand deposits fall, so M1M_1 falls. Time deposits rise by the identical amount, so quasi-money increases. The net change in M2M_2 is (−ΔM1)+(+ΔTime Deposits)=0(- \Delta M_1) + (+ \Delta \text{Time Deposits}) = 0.
Evaluate the immediate impact on both aggregates.

Anahtar Kavram

Monetary Aggregates (M1M_1 vs M2M_2) and Money Supply Structure
Bu soruyu puanla

Konular

Types and Supply of Money

Bu konudan daha fazla soru