Sure, let's go through these calculations and explanations step-by-step.
### Q.2.1.1 Money supply M1
To calculate the money supply M1, we need to sum up the following components:
- Paper money
- Coins
- Demand deposit in commercial banks
Given values:
- Paper money: R 117430 million
- Coins: R 22526 million
- Demand deposit in commercial banks: R 924895 million
So, the formula to calculate M1 is:
[tex]\[ \text{M1} = \text{Paper money} + \text{Coins} + \text{Demand deposit} \][/tex]
[tex]\[ \text{M1} = 117430 + 22526 + 924895 = R 1064851 \, \text{million} \][/tex]
Therefore, the money supply M1 is R 1064851 million.
### Q.2.1.2 Money supply M2
To calculate the money supply M2, we need to add the savings deposit and certificate of deposit to M1:
Given values:
- M1: R 1064851 million (from the previous calculation)
- Savings deposit: R 84915 million
- Certificate of deposit: R 92560 million
So, the formula to calculate M2 is:
[tex]\[ \text{M2} = \text{M1} + \text{Savings deposit} + \text{Certificate of deposit} \][/tex]
[tex]\[ \text{M2} = 1064851 + 84915 + 92560 = R 1242326 \, \text{million} \][/tex]
Therefore, the money supply M2 is R 1242326 million.
### Q.2.1.3 Money supply M3
To calculate the money supply M3, we need to add the long term deposit to M2:
Given values:
- M2: R 1242326 million (from the previous calculation)
- Long term deposit: R 1450128 million
So, the formula to calculate M3 is:
[tex]\[ \text{M3} = \text{M2} + \text{Long term deposit} \][/tex]
[tex]\[ \text{M3} = 1242326 + 1450128 = R 2692454 \, \text{million} \][/tex]
Therefore, the money supply M3 is R 2692454 million.
### Q.2.1.4 Explanation of the term "demand deposit" and an example
Demand deposits are funds held in a bank account that can be withdrawn at any time without any advance notice. These types of deposits are very liquid and can be accessed easily through various means like writing a check or using an ATM. An example of a demand deposit is a regular checking account.
### Q.2.2 Main functions of money
Money serves several key functions in an economy. Two of the main functions are:
1. Medium of exchange: Money is used to facilitate the sale, purchase, or trade of goods and services between parties. By acting as an intermediary, money solves the problems associated with barter trade, where two parties must have a mutual need for each other's goods.
2. Store of value: Money can be saved and retrieved in the future, holding its value over time. This function allows individuals to save for future expenses or unexpected costs.
These explanations should provide a comprehensive understanding of the money supply calculations and the fundamental concepts relating to money.
