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Which of the following is an example of a cash equivalent?

A. Currency
B. Commercial paper
C. Demand deposit
D. Traveler's check

1 Answer

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Final answer:

Currency, demand deposits, and traveler's checks are the cash equivalents as they are part of the M1 money supply, which includes highly liquid monetary assets.

Step-by-step explanation:

The question asks about examples of cash equivalents. Essentially, cash equivalents are safe and highly liquid assets that can be quickly turned into a known cash amount. M1 money supply data shows what types of monetary components are considered extremely liquid. According to the provided information, the components of M1 money supply at a certain time included currency, traveler's checks, and demand deposits and other checking accounts.

Among the options given (A. Currency, B. Commercial paper C. Demand deposit, D. Traveler's check), currency and traveler's checks are explicitly mentioned as part of M1, and demand deposits (money in checking accounts) fall under the same category. Thus, these are all considered cash equivalents. However, commercial paper is not specified as part of M1, hence it is not a cash equivalent in this context.

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