Question

Refer to the given list of assets.

1. Large-denominated ($100,000 and over) time deposits
2. Noncheckable savings deposits
3. Currency (coins and paper money) in circulation
4. Small-denominated (under $100,000) time deposits
5. Stock certificates
6. Checkable deposits
7. Money market deposit accounts
8. Money market mutual fund balances held by individuals
9. Money market mutual fund balances held by businesses
10. Currency held in bank vaults

The assets that are not included in either M1 and M2 are
a. Items 1,5,9 and 10
b. Items 2, 5, 9, 9
c. Items 1,3,5,7 and 9
d. all of the 10 items listed

Answer 1

a. Items 1,5,9 and 10

Step-by-step explanation:

M1 refers to Money Supply which includes physical currencies, coins, demand deposits, amounts in checking accounts, liquid cash and other forms of cash that can be withdrawn immediately eg in ATM.

Items under M1 from the question are:

3. Currency (coins and paper money) in circulation

6. Checkable deposits

M2 refers to money supply that comprises of the items in M1 and also include other types of deposits eg Savings deposits, mutual funds by individuals, time deposits. Funds that even though cannot be readily converted to cash but can be withdrawn with more effort.

Items under M2 from the question are:

2. Non-checkable savings deposits

4. Small-denominated (under $100,000) time deposits

7. Money market deposit accounts

8. Money market mutual fund balances held by individuals