M2 includes M1 plusQuestion 7Answera.currency in circulation, checking account deposits in banks, and holdings of traveler's checks.b.savings account balances, money market deposit accounts in banks, small-denomination time deposits, and noninstitutional money market fund shares.c.currency in circulation, savings account balances, and small-denomination time deposits.d.checking account deposits, large-denomination time deposits, and noninstitutional money market fund shares.
Question
M2 includes M1 plusQuestion 7Answera.currency in circulation, checking account deposits in banks, and holdings of traveler's checks.b.savings account balances, money market deposit accounts in banks, small-denomination time deposits, and noninstitutional money market fund shares.c.currency in circulation, savings account balances, and small-denomination time deposits.d.checking account deposits, large-denomination time deposits, and noninstitutional money market fund shares.
Solution
The correct answer is b. M2 includes M1 plus savings account balances, money market deposit accounts in banks, small-denomination time deposits, and noninstitutional money market fund shares.
Here's a step-by-step explanation:
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M1 is a narrow measure of money's function as a medium of exchange, and it includes physical currency, demand deposits, other checkable deposits and Negotiable Order of Withdrawal (NOW) Accounts.
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M2 is a broader measure of money's function as a store of value. It includes everything in M1 plus savings deposits (which include money market deposit accounts), small-denomination time deposits (time deposits in amounts of less than $100,000), and balances in retail money market mutual funds.
So, the answer is b. M2 includes M1 plus savings account balances, money market deposit accounts in banks, small-denomination time deposits, and noninstitutional money market fund shares.
Similar Questions
M1 includesQuestion 2Answera.currency in circulation, savings account balances, checking account deposits in banks, and holdings of traveler's checks.b.currency in circulation, checking account deposits in banks, and holdings of traveler's checks.c.currency in circulation, savings account balances, and checking account deposits in banks.d.coins, savings account balances, traveler's checks.
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