Question

What is the transaction type for the following transactions?

1) Credit
2) Debit
3) Cash
4) Online

Answer 1

In order to determine if an item is in M1, M2, or neither, we need to understand the definitions of M1 and M2. M1 refers to the most liquid forms of money, which includes physical currency and checking account deposits. M2 includes M1 and less liquid forms of money, such as savings accounts and time deposits.

Step-by-step explanation:

In order to determine if an item is in M1, M2, or neither, we need to understand the definitions of M1 and M2. M1 refers to the most liquid forms of money, which includes physical currency and checking account deposits. M2, on the other hand, includes M1 along with less liquid forms of money, such as savings accounts and time deposits.

Now, let's analyze each item:

1. Your $5,000 line of credit on your Bank of America card - Neither M1 nor M2, as it is not actual money but a credit limit.
2. $50 dollars' worth of traveler's checks you have not used yet - Neither M1 nor M2, as they are considered a form of prepaid money and not directly accessible or spendable.
3. $1 in quarters in your pocket - M1, as it is physical currency.
4. $1200 in your checking account - M1, as it is a checking account deposit and can be easily accessed and used.
5. $2000 you have in a money market account - M2, as it is a less liquid form of money and falls under the broader category of savings accounts.