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Zorluk: ZorTypes and Supply of Money

The central bank of an economy compiles the following financial data (in billions of Naira):

- Currency in circulation outside vault cash: N450 billion\text{N}450\text{ billion}
- Demand deposits at commercial banks: N750 billion\text{N}750\text{ billion}
- Savings deposits at commercial banks: N500 billion\text{N}500\text{ billion}
- Time deposits at commercial banks: N300 billion\text{N}300\text{ billion}
- Treasury bills held by the non-bank public: N200 billion\text{N}200\text{ billion}

Based on the data provided, what are the exact values of the narrow money supply (M1M_1) and the broad money supply (M2M_2), respectively?

  1. N1,200 billion\text{N}1,200\text{ billion} for M1M_1 and N2,000 billion\text{N}2,000\text{ billion} for M2M_2Cevap
  2. B
    N1,200 billion\text{N}1,200\text{ billion} for M1M_1 and N2,200 billion\text{N}2,200\text{ billion} for M2M_2
  3. C
    N1,700 billion\text{N}1,700\text{ billion} for M1M_1 and N2,000 billion\text{N}2,000\text{ billion} for M2M_2
  4. D
    N750 billion\text{N}750\text{ billion} for M1M_1 and N1,550 billion\text{N}1,550\text{ billion} for M2M_2

Cevap

Narrow money supply (M1M_1) is N1,200 billion\text{N}1,200\text{ billion} and broad money supply (M2M_2) is N2,000 billion\text{N}2,000\text{ billion}.
Narrow money (M1M_1) is determined by adding currency in circulation (N450 billion\text{N}450\text{ billion}) to demand deposits (N750 billion\text{N}750\text{ billion}), yielding N1,200 billion\text{N}1,200\text{ billion}. Broad money (M2M_2) adds quasi-money (savings deposits of N500 billion\text{N}500\text{ billion} and time deposits of N300 billion\text{N}300\text{ billion}) to M1M_1, giving N2,000 billion\text{N}2,000\text{ billion}. Treasury bills are money market assets, not components of M1M_1 or M2M_2.

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1
Calculate narrow money supply (M1M_1)
M1=Currency in circulation+Demand deposits=N450 billion+N750 billion=N1,200 billionM_1 = \text{Currency in circulation} + \text{Demand deposits} = \text{N}450\text{ billion} + \text{N}750\text{ billion} = \text{N}1,200\text{ billion}
Narrow money (M1M_1) consists of physical currency held by the public plus demand deposits (current account balances) which serve directly as medium of exchange.
2
Calculate quasi-money (near money deposits)
Quasi-money=Savings deposits+Time deposits=N500 billion+N300 billion=N800 billion\text{Quasi-money} = \text{Savings deposits} + \text{Time deposits} = \text{N}500\text{ billion} + \text{N}300\text{ billion} = \text{N}800\text{ billion}
Savings and time deposits are highly liquid financial assets that serve as store of value but cannot be directly spent without prior conversion.
3
Calculate broad money supply (M2M_2)
M2=M1+Quasi-money=N1,200 billion+N800 billion=N2,000 billionM_2 = M_1 + \text{Quasi-money} = \text{N}1,200\text{ billion} + \text{N}800\text{ billion} = \text{N}2,000\text{ billion}
Broad money (M2M_2) measures total liquidity in the banking system by summing narrow money (M1M_1) and quasi-money components.
4
Evaluate short-term securities (Treasury bills)
Treasury bills (N200 billion\text{N}200\text{ billion}) are excluded from standard M1M_1 and M2M_2 money supply aggregates.
Treasury bills are money market debt instruments, not bank deposit liabilities included in standard M1M_1 or M2M_2 money supply definitions.

Anahtar Kavram

Monetary Aggregates (M1M_1 and M2M_2 definitions)
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Konular

Types and Supply of Money

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