Question

M1 and M2 are two definiions of money supply. Determine if the items listed are included in the money supply under each of these definitions and place them in the appropriate category. M1 only M2 only M1 and M2 Neither M1 nor M2 Answer Bank credit cards balances in checking accounts travelers checks balances in savings accounts common stock currency certificates of deposit gold money market account balances

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Answer #1

Answer : Table showing information as follows :

M1 only

M2 only

  • Certificate of deposit is included in the M2.
  • Balance in the savings deposit has been included in M2 only.
  • Money market account balance is included in M2.

M1 and M2 only

  • Currency is included both in M1 and M2.
  • Travelers check included both in M1 and M2.
  • Balance in check in account includes in both M1 and M2.

Neither M1 nor M2

  • Credit card
  • Gold
  • Common stock

M1 included physical money currency and coins as well as demand deposits etc.

M2 included all the items of M1plus saving deposit as well as certificate of deposit.

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