Final answer:
In simplest form, account consists of an account number, balance, holder's name, and type. The categorization of monetary items into M1, M2, or neither are as follows: line of credit is neither, traveler's checks and quarters are M1, checking account balance is M1, and money market account is M2.
Step-by-step explanation:
In response to a student's question on categorizing certain monetary items into M1, M2, or neither, here is the detailed categorization:
- a. Your $5,000 line of credit on your Bank of America card: Neither M1 nor M2, as it represents potential borrowing capacity rather than actual money.
- b. $50 dollars' worth of traveler's checks you have not used yet: M1, because traveler's checks are a component of the money supply that can be used for transactions immediately.
- c. $1 in quarters in your pocket: M1, as it is part of the currency in circulation and is readily usable for transactions.
- d. $1200 in your checking account: M1, because checking account balances are included in M1 since they can be converted into currency on demand and used for transactions.
- e. $2000 you have in a money market account: M2, because money market accounts are included in M2, representing near-monies that are less liquid than M1 components but still available with few restrictions.
The balance sheet of a bank, often represented in a T-account format, includes assets such as reserves held at the Federal Reserve, loans to customers, and bonds.