16.M3 money supply measure includes which of the following in addition to M2? A. Net time deposits of the banks B. Post office savings deposits C. Currency held by public D. Money market funds
Question
16.M3 money supply measure includes which of the following in addition to M2? A. Net time deposits of the banks B. Post office savings deposits C. Currency held by public D. Money market funds
Solution
M3 money supply measure includes all the components of M2 money supply, plus some additional items. Here's a breakdown of what each option in your question refers to:
A. Net time deposits of the banks: These are types of bank deposits that cannot be withdrawn for a certain "term" or period of time unless a penalty is paid. They are included in M3.
B. Post office savings deposits: These are savings accounts maintained by post offices. In some countries, these are included in M3, but it can vary depending on the country's specific definition of M3.
C. Currency held by public: This refers to physical money like coins and banknotes. This is actually a component of M1, which is included in both M2 and M3.
D. Money market funds: These are types of mutual funds that invest in short-term debt securities. They are included in M3.
So, to answer your question, M3 money supply measure includes net time deposits of the banks and money market funds in addition to M2. The inclusion of post office savings deposits can vary. Currency held by the public is part of M1, M2, and M3.
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