What is the Monetary Base?

Q1 

The Current size of the monetary base 1 (M1) money stock is $3714.3 billion. This includes funds that are readily accessible for spending. Concurrently, the size of monetary base 2 (M2) money stock is $14079.5 billion. It includes broader set of assets held by households. M2 mainly consists of all components that are highly liquid contrary to M1 which involves cash reserves ( Wiles, 2015 ). Besides, the current size of M1 is 26.4% of M2 since M1 is a component of M2. Further still, M1 has a number of components. Currency $1557 billion ((1557/3714.3)*100), which is 42%. Traveler`s checks of nonbank issuers accounts for $1.8 billion ((1.8/3714.3)*100). This implies that it is 0.05% of M1. Demand deposits, on the other hand, is $1469.6 billion ((1469.6/3714.3)*100), which is 40% of M1 and other checkable deposits amount to $611.5 billion ((611.5/3714.3)*100), and is, therefore 17% of M1. 

Q2 

It is essential to note that a firm of this magnitude would greatly depend on the assistance of commercial banks or financial institutions. Also, regarding safety, it would be essential to rely on the banking system. As the treasurer, I would underscore the significant need of undertaking a cash flow analysis in the course of determining maturities pertaining to short-term investments. I would then offer an explanation on the importance of the certificates of deposits (CD). They are accessible for a specified duration of time in order to ascertain that cash flow projections are met. Besides, they offer meaningful rates of return ( Brayton, Laubach & Reifschneider, 2014 ). Further still, the Federal Deposit Insurance Corporation (FDIC) offers protection to the certificate of Deposits and other deposits up to a sum of $250000. Recently, however, the specified limit under protection of the FDIC has been increasing. 

Q3 

I would begin by reiterating that this is likely to result in both positive and negative implications. In reference to the former, the lending limits would increase depending on the capital resources possessed by the bank holding Company. Also, the lending capacity would also be expanded owing to the importation of funds whenever they are required by financial institutions situated in other jurisdictions ( Galaskiewicz, 2016 ). It would also be possible for the entity to offer brokerage services, card issuance, insurance, and other related services. Most importantly, competition would ensue among the financial institution and this could result in lower rates for the community. On the negative side, it is possible that the individuals currently working in various capacities at the largest local commercial bank could be replaced by people from outside the community. The banking community could also end up being controlled by the large financial institution. Also, it is likely that the new entrant may not be as sympathetic as the former bank was to the needs of the community. 

References 

Brayton, F., Laubach, T., & Reifschneider, D. (2014). Optimal-Control Monetary Policy in the FRB/US Model Board of Governors of the Federal Reserve System November 21, 2014.  FEDS Notes . 

Wiles, W. W. (2015). Federal Reserve System.  System . https://fred.stlouisfed.org/series/M1 

Galaskiewicz, J. (2016).  Social organization of an urban grants economy: A study of business philanthropy and nonprofit organizations . Elsevier.