Final answer:
Money orders and official checks are known as negotiable instruments. they are part of the M1 money supply, which also includes currency, coins in circulation and checkable deposits. Tthese items are easily converted to cash, ensuring liquidity in the economy.
Step-by-step explanation:
Money orders and official checks are also known as negotiable instruments. these financial tools are part of the M1 money supply, which is a narrow definition of money that includes currency and checking accounts in banks. As with any component of M1, they are highly liquid and can be easily converted to cash. Money orders and official checks provide a secure form of payment because, unlike personal checks, they are prepaid and guarantee that the funds are available.
The M1 money supply includes a range of items such as coins, currency in circulation, and checkable deposits - also known as demand deposits. These financial resources are measured daily by the Federal Reserve System due to their relevance to the economy's liquidity. It's important to understand that while money orders and official checks are negotiable instruments, not all forms of negotiable instruments are included in M1, as this category pertains to liquid and ready-to-use money.