Question

The differences between the various 'Money Supplies' (M1, M2, …) are base on A) The volume of the economy they make up C) Whether the element is bank or gov. issued B) The degree of liquidity of each element D) Consumer preferences

Answer 1

The correct option here is B) the degree of liquidity in each element.

Step-by-step explanation:

Money supply can be described as total amount of money , which is present in an economy at a point of time.

Money supply can be classified as M0,M1,M2 etc , where these different money supply's reflects different type of liquidity that each type of money has in the economy. M0, M1 actually consists of narrow money and contain coins and notes, which are in circulation in the economy and these are easily convertible in to cash and they are most liquid elements and same way M2 would be less liquid than M1, and so on.