A change in any one of the components of will directly affect the money supply. (Put in the measure which is relatively broad.)
Question
A change in any one of the components of will directly affect the money supply. (Put in the measure which is relatively broad.)
Solution
The measure which is relatively broad and directly affects the money supply when any of its components change is M2. M2 includes M1 (which consists of cash in circulation, demand deposits, and other liquid deposits) plus short-term time deposits in banks, savings deposits, and non-institutional money-market funds. Therefore, a change in any one of these components will directly affect the money supply.
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