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Old 07-31-2019, 08:48 AM
Max S. is offline
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Join Date: Aug 2017
Location: Florida, USA
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Quote:
Originally Posted by Wrenching Spanners View Post
1) I think at times you're example is looking at the version of m0 measure of money supply which doesn't include bank deposits, and referring to it as m1.
Both of the bank deposit accounts in my example were savings accounts, so m1 was in fact m0 minus the total under the bank column.

Quote:
Originally Posted by Wrenching Spanners View Post
2) m1 includes both currency and demand deposits. So the act of depositing cash into a bank account increases the amount of demand deposits, but doesn't move the m1 measure of money supply.
Those deposits (steps 1 & 4) were to savings accounts, which don't count towards m1. Think of each person's balance, the top row of an entry under their own column, as their checking accounts or cash on hand.

Quote:
Originally Posted by Wrenching Spanners View Post
3) Interest charges aren't part of the money supply, and at a transactional level don't cause it to move up and down.
Correct. Note that neither m0 (total money supply) nor m1 change when the bank credits Joe's savings account in step 6, or when it charges interest on Sue's loan in step 7.

~Max