1. Why are there more elements to the money supply than just the money that is actively circulating
2. Why do different parts of the money supply need to be measured differenly?
3. Why must the government enforce the value of fiat money by requiring its use for settling private debts in
court or for transactions with the government?
4. What would have happened to the English goldsmiths if for some reason everyone had wanted their gold back
at the same time? What could the goldsmiths have done?
Money and Interest
As you've learned, the money supply is defined as the liquid assets held by banks and individuals. The Federal
Reserve maintains historical data on the money supply on its web site. Visit the site to answer the following
Suggested keywords: money supply, Federal Reserve
Web site: http://www.federalreserve.gov/releases/H6/hist/
5. What was the seasonally adjusted value of M1 in January 1960? How does that compare to the most
recent month shown in the table? (Hint: From the main page, click the ''Table 1'' link.)
6. Generally speaking, how has the value of M2 compared to the value of M3 been changing over the
past 40 years? How do you explain this change?
7. For the most recent week shown, what was the largest component of seasonally adjusted M1? What
was the smallest? How does this compare to the figures shown for the week of January 6, 1975?
(Hint: From the main page, click the ''Table 9'' link.)