Final answer:
Option A: The most convenient form of money to spend while shopping is M1, containing physical cash and checking deposits. M1 is more liquid, while M2 includes savings accounts and other forms of deposits that are not as easily spent without additional steps.
Step-by-step explanation:
When out shopping for clothes and books, the most convenient and easiest form of money to spend is M1, which includes physical cash and checking deposits. M2 includes savings deposits that can be converted easily to M1, but typically require additional steps such as withdrawing from an ATM.
The classifications for the given items are as follows:
- Certificate of Deposit (CD): Neither M1 nor M2 as it is generally considered less liquid.
- Money market deposit account: M2,
- Traveler's checks: M1,
- Savings account: M2.
These classifications are important to understand because they reflect the liquidity and ease of use of different forms of money.
M1, which includes physical cash and checking deposits, is easier and more convenient to spend than M2. The currency and checks in M1 can be directly used for purchases without needing additional steps. On the other hand, M2 includes physical cash and savings deposits, which may require extra effort to access and convert into spendable currency.
In terms of the items listed, Certificate of Deposit (CD) is not included in M1 or M2. Money market deposit account is part of M2. Traveler's checks are included in M1, and savings account is part of M2.