Question

If a cardholder were to call in for a balance inquiry, what is the correct amount to tell them?

a) Exact balance
b) Approximate balance
c) Higher balance
d) Lower balance

Answer 1

The correct balance to inform a cardholder is the exact balance. Classification of financial items into M1 or M2: a line of credit is neither M1 nor M2, unused traveler's checks and physical currency are M1, checking account balances are M1, and money market accounts are M2.

Step-by-step explanation:

If a cardholder were to call in for a balance inquiry, the correct amount to tell them is their exact balance. Providing an approximate, higher, or lower balance could lead to confusion or financial mismanagement on the part of the cardholder.

Now, regarding the classification in M1 or M2 money supply for the following items:

• Your $5,000 line of credit on your Bank of America card is neither M1 nor M2 because it represents potential borrowing, not actual money.
• $50 dollars' worth of traveler's checks you have not used yet are part of M1 as they are traveler's checks not issued by the treasury.
• $1 in quarters in your pocket is part of M1 since it is physical currency.
• $1200 in your checking account is also a component of M1 as it is demand deposits.
• The $2000 you have in a money market account would be part of M2 as it includes M1 and balances in most savings accounts, and money market accounts.