The M-3 (money supply) includes Blank______.Multiple choice question.only M-1 and M-2only M-2 and institutional money market fundsM-1, M-2, and commercial paperonly M-1 and institutional money market funds
Question
The M-3 (money supply) includes Blank______.Multiple choice question.only M-1 and M-2only M-2 and institutional money market fundsM-1, M-2, and commercial paperonly M-1 and institutional money market funds
Solution
The correct answer is: M-1, M-2, and commercial paper.
Here's why:
M-1: This is the most liquid form of money supply. It includes physical currency, demand deposits, traveler's checks, and other checkable deposits.
M-2: This includes all elements of M-1, as well as savings deposits, time-related deposits, and non-institutional money market funds.
M-3: This includes all elements in M-1 and M-2, as well as large time deposits, institutional money market funds, short-term repurchase agreements, along with other larger liquid assets.
However, in the context of this question, the closest answer is M-1, M-2, and commercial paper. Commercial paper is a short-term unsecured promissory note issued by corporations and foreign governments, which can be included in M-3.
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