關於 Money supply 問題 ((M1,M2,M3))
Q1, Explain the effects of the following TWO items on the money supply M1
1) More and more people use credit cards for payment, whereas fewer people use cash to settle bills
2) Since banks offer high interest return to customers of demand deposits, more and more people treansfer their deposits from savings accounts to current accounts.
- wilson625_hkLv 51 十年前最愛解答
Before answering the question, you should explain Money supply definition :
M1 : The sum of legal tender notes and coins held by the public + customers' demand deposits placed with banks.
M2 : M1 + customers' savings and time deposits with banks + negotiable certificates of deposit (NCDs) issued by banks held outside the banking sector.
M3 : M2 + customers' deposits with restricted licence banks and deposit-taking companies + NCDs issued by these institutions held outside the banking sector.
1. Fewer people use cash to settle bills, that means public will hold less cash. Then M1 will decrease.
2. Because the increase in interest on demand deposit will attract the fund from savings deposit (M2), M1 will increase.
You can get full mark, if you follow it.