Answer:
The money supply (M2) in this economy is:
= $302,000.
Explanation:
a) M2 includes cash, checking deposits, and convertible near money (or savings and time deposits, certificates of deposit, and money market funds). Â M2 is always higher than M1, which is made up of cash and checking deposits only.
b) Data and Calculations:
M2 in this economy equals to:
Sarah's deposit of $200,000
Peter's deposit of $100,000
Olga's cash of $2,000
Total M2 = $302,000