Question

Which of these is neither a good nor a service?

1) a gallon of gasoline
2) a piano lesson
3) a meal at a restaurant
4) $20 bill

Answer 1

The items are classified into M1 and M2 based on their liquidity and accessibility for transactions.

Step-by-step explanation:

The items in M1 are considered the most liquid because they can be easily accessed and used for transactions. The items in M2 are slightly less liquid but still readily available. Now, let's analyze each item:

1. Your $5,000 line of credit on your Bank of America card: This is neither M1 nor M2 because it is not actual money but a credit limit.
2. $50 dollars' worth of traveler's checks you have not used yet: This is M1 because it is considered a form of money that can be used for purchases.
3. $1 in quarters in your pocket: This is M1 because it is actual physical cash that can be used for transactions.
4. $1200 in your checking account: This is M1 because it is a demand deposit that can be easily accessed for transactions.
5. $2000 you have in a money market account: This is M2 because although it is still readily available, it may have some restrictions or limitations on immediate access.