Final answer:
Items like traveler's checks, quarters, and checking account balances are categorized as M1 because they are liquid and can be readily used for transactions. The money market account falls under M2, which includes liquid assets that are slightly less accessible than those in M1. A line of credit is neither in M1 nor M2.
Step-by-step explanation:
The question pertains to the classification of different financial assets into M1 and M2 money supply categories. Here are the classifications:
- a. Line of credit: This is neither in M1 nor M2 because it represents potential credit, not actual currency in circulation.
- b. Traveler's checks: These are included in M1 since they are a form of checkable deposit and are ready to spend.
- c. Quarters in your pocket: This is included in M1 as it is part of physical currency in circulation.
- d. Checking account: The balance in your checking account falls under M1 as it's readily accessible for spending.
- e. Money market account: This is included in M2. M2 includes all of M1 plus savings deposits, small-denomination time deposits, and non-institutional money market fund shares.