MO: For each of the following indicate with of the monetary aggregates (M1 or M2)?
For each of the following indicate with of the monetary aggregates (M1 or M2) includes them (if both, indicate so)
A) small time deposits
B)bond mutual funds
c)mastercard credit card balances
d)currency
e)money market deposit accounts at banks
Answers and Views:
Answer by misa
M1 both (d) and (e)
First of all, definitions of money are broad and somewhat arbitrary, but are based on liquidity – how easy it is to use the funds to finance transactions. Also, anything that is included in M1 is also included in M2, so any answer that involves M1 will by definition be an answer of “both”.
A) small time deposits are included in M2 but not M1
B) bond mutual funds are included in neither
C) Mastercard credit card balances are included in neither
D) currency is included in M1, and by definition, both M1 and M2
E) money market deposit accounts at banks are included in M2 but not M1
In general, M1 includes only currency and demand deposits and other checkable deposits. M2 includes items that can easily be converted to M1 items, usually within the same day.
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