Final answer:
The answer to the question whether M1 includes all components of M2 is True. M1 contains currency, checking deposits, and traveler's checks, while M2 encompasses all of M1 plus savings accounts, time deposits, and money market mutual funds.
Step-by-step explanation:
The student asked if the money supply M1 includes all components of M2. The answer is True (B). M1 is a category of the money supply that includes the most liquid forms of money, such as currency and checking deposits. Because M2 is a broader measure of the money supply, it includes everything in M1 plus additional forms of money, such as savings accounts, time deposits below $100,000, and individual money market mutual fund balances.
- Checking deposits
- Traveler's checks (to a lesser degree)
- Savings accounts
- Time deposits below $100,000
- Individual money market mutual fund balances