Final answer:
Corporate bonds are not included in the M2 money supply. M2 encompasses liquid assets such as savings deposits, money market funds, certificates of deposit, and other time deposits. Corporate bonds are longer-term investments and are considered part of the broader financial system, rather than as components of the money supply.
Step-by-step explanation:
The M2 money supply includes various types of assets that are highly liquid, but not as liquid as those in M1. M2 is a broader classification of money than M1 and includes savings deposits, money market funds, certificates of deposit (CDs), and other types of time deposits. However, corporate bonds do not fall under the category of M2.
Corporate bonds are a form of financial capital that allows corporations to raise funds. These are debt securities that a company issues to investors for capital. They agree to pay back the borrowed amount plus interest at a specified future date. While corporate bonds are important financial instruments, they are not counted as part of the M2 money supply because they cannot be used directly as a medium of exchange and are not liquid enough to be considered money.
Ultimately, corporate bonds are not as liquid as the assets included in M2, and therefore do not fall under this category. They are instead considered as longer-term investments and would be classified under a different component of the financial system, not within the measures of money supply such as M1 or M2.