Question
Measures of the total amount of money circulating in an economy. M1 includes physical money and checking deposits; M2 includes M1 plus savings accounts and time deposits. Money Supply (M1, M2 etc.) Consumer Price Index (CP) Supervision and Regulation 12 Regional Federal Reserve Banks
Solution
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Resposta
The measures of the total amount of money circulating in an economy are referred to as the money supply. The money supply is typically categorized into different aggregates based on the liquidity of the assets included. The most commonly used aggregates are M1, M2, and M3.M1 includes the most liquid forms of money, such as physical currency (coins and bills) and demand deposits (checking accounts). M1 represents the money that is readily available for immediate transactions.M2 includes M1 plus other forms of near money, such as savings accounts and small time deposits. These assets are slightly less liquid than M1 but still considered highly liquid and easily convertible to cash.M3 includes M2 plus larger time deposits, institutional money market funds, and other larger liquid assets. M3 represents the broadest measure of the money supply and includes the most comprehensive range of assets.The Consumer Price Index (CPI) is a measure of the average change in prices paid by consumers for a basket of goods and services over time. It is commonly used to track inflation and measure the purchasing power of a currency.Supervision and regulation refer to the oversight and control exercised by authorities, such as central banks or government agencies, to ensure the stability and integrity of financial systems and institutions.The 12 Regional Federal Reserve Banks are the regional banks that make up the Federal Reserve System in the United States. They are responsible for implementing the monetary policy set by the Federal Open Market Committee and overseeing the banking system in their respective regions.