Question

1. Dan Elliott uses online banking. He pays the basic monthly

charge, 9 bills, and requests a printed statement. He also has

ATM transactions that include 2 out-of-network transactions

and a cash advance of $200.00. What are his total fees for

the month?

Pidni

Answer 1

The items are classified as M1, M2, or neither based on their liquidity and spendability. A line of credit and traveler's checks are neither M1 nor M2 as they are not actual money. Physical currency and money in a checking account are classified as M1, while money in a money market account is classified as M2.

Step-by-step explanation:

M1 refers to the narrowest definition of the money supply, which includes only the most liquid forms of money that can be easily spent. M2 is a broader measure of the money supply and includes M1 as well as other less liquid forms of money. Neither refers to items that do not fit into either M1 or M2.

a. Your $5,000 line of credit on your Bank of America card is neither in M1 nor M2 as it is not actual money but a credit limit.

b. $50 dollars' worth of traveler's checks you have not used yet is neither in M1 nor M2 as they need to be exchanged for cash before they can be spent.

c. $1 in quarters in your pocket is in M1 as it is physical currency that can be spent.

d. $1200 in your checking account is in M1 as it is a liquid form of money that can be spent.

e. $2000 you have in a money market account is in M2 as it is a less liquid form of money that can be accessed but may have restrictions or penalties for withdrawal.