3. The money supply is the total value of money in the hands ofthe public. Amountmoney supply in a narrow sense (M1) is the money supply consistingof paper money,coins and demand deposits or checks. Technically, what is countedas money supply is money that isreally in the hands of the community. Money in the bank, banknotesand coins belonging togovernment is not counted as money supply. The money supply in abroad sense (M2) is M1plus time deposits (quasi money).The development of the money supply reflects the development of theeconomy. Usually whenWhen the economy grows, the money supply also increases, but itscompositionfickle. If the economy is more advanced, the portion of the use ofcurrency (paper and metal)less and less, replaced by demand deposits. If the economy isincreasing, the composition of M1 inThe economy is getting smaller, because the portion of quasi-moneyis getting bigger. Pay attention to Table 3. below:
- 3 The Money Supply Is The Total Value Of Money In The Hands Of The Public Amount Money Supply In A Narrow Sense M1 I 1 (37.15 KiB) Viewed 16 times
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- 3 The Money Supply Is The Total Value Of Money In The Hands Of The Public Amount Money Supply In A Narrow Sense M1 I 2 (24.58 KiB) Viewed 16 times
Question 3:3.a. Pay attention to Table 3. above. What can you conclude fromthe 3 indicators presented : GDPnominal, the money supply in the narrow sense and the money supplyin the broad sense? Describeyour analysis.3.b. Pay attention to Table 3. above. What is the composition ofthe money supply over a period of time?the? Describe your analysis.3.c. Pay attention to Table 3. above. How was the velocity of moneyduring that period? Is there anyto do with the composition of the money supply? Describe youranalysis.
Year 1999 2000 2005 2010 2015 2016 2017 2018 PBD Nominal 1,119,442 1,389,770 2,774,281 6,864,133 11.526,333 12,401,729 13,587.213 14.837.358 M (2) Amount of Money Supply 124,663 162,186 271,140 605,411 1,055,440 1,237,643 1,390,807 1457.150 Quasi Money & Non-Share Securities (3) 521,572 584,842 931,622 1,865,795 3,493,360 3,767,334 4,028,358 4.302.896 (4)=(2)+(3) 646,235 747,028 1,202,762 2,471,206 4,548,800 5,004,977 5,419,165 5.760.046 Composition of the Money Supply (M1/M2) (M2-M1)/M2 (5) 0.19 0.22 0.23 0.24 0.23 0.25 0.26 0.25 (6) 0.81 0.78 0.77 0.76 0.77 0.75 0.74 0.75 Money Velocity PDB.N/M1 (7)=(1)/(2) 8.98 8.57 10.23 11.34 10.92 10.02 9.77 10.18 PDB.N/M2 (8)=(1)/(4) 1.73 1.86 2.31 2.78 2.53 2.48 2.51 2.58
Year 2019 2020 PDB Nominal M1 Amount of Money Supply Quasi Money & Letter Valuable non Stocks (2) 1,565,358 1,855,625 15,833,943 15,434,152 Source: from various sources, data processed. 2022 (3) 4,571,194 5,044,425 M2 (4)-(2)+(3) 6,136,552 6,900,049 Composition Amount of Money Circulating (M1/M2) (M2-M1)/M2 PDB.N/M1 PDB.N/M2 (5) 0.26 0.27 (6) Money Velocity 0.74 0.73 (7)=(1)/(2) (8)=(1)/(4) 10.12 8.32 2.58 2.24