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Which of the following are included in M2?

I. $5,000 certificate of deposit (CD)
II. $3,000 debt on a credit card
III. $1,000 in traveler’s checks
IV. $500 in your piggy bank

a. I and II
b. I and III
c. I, III, and IV
d. I, II, and III
e. I, II, III, and IV

User Topshot
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1 Answer

4 votes

Answer:

c. I , III, and IV

Step-by-step explanation:

M1 and M2 are amongst the ways of measuring money supply of an economy.

M1 basically includes physical currency and coins, demand deposits, traveler's checks, and other checkable deposits.

M2 is regarded as a broader classification than M1 since it includes assets that are highly liquid but are not cash.

M2 includes M1 plus savings deposits, money market deposits, certificate of deposits less than $100,000 and money market mutual fund balances which can be readily redeemed.

Unlike the types of financial assets defined as money that are included in money supply, credit card transactions create loans that the borrower must pay later and hence are excluded from M2.

Hence M2 will include $5,000 certificate of deposits, $ 1000 in traveler's checks and $ 500 in piggy bank i.e option (c)

User Danah
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