3.Until 1933, the Unites States was on the gold standard, and people couldreceive gold from the federal government in exchange for their paper currency. Al-though the federal government is no longer willing to exchange paper currency forgold, the Federal Reserve still stores more than 500,000 gold bars in the basement ofthe New York Federal Reserve building in Manhattan. Are these gold bars included ineither the M1 or M2 definition of the money supply? Briefly explain why they are, orare not, included.

Answered: Until 1933, the Unites States was on…

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter11: The Monetary System

Section: Chapter Questions

Problem 5PA

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3.
Until 1933, the Unites States was on the gold standard, and people could
receive gold from the federal government in exchange for their paper currency. Al-
though the federal government is no longer willing to exchange paper currency for
gold, the Federal Reserve still stores more than 500,000 gold bars in the basement of
the New York Federal Reserve building in Manhattan. Are these gold bars included in
either the M1 or M2 definition of the money supply? Briefly explain why they are, or
are not, included.

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The total quantity of money that is readily usable in an economy at any given time—including physical money, demand deposits, and numerous other kinds of liquid assets—is referred to as the money supply.

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