Question

Identify whether each example in the following table belongs in M1, M2, or both.

Example M1 M2
Juanita has $8,000 in a six-month certificate of deposit (CD).
Charles has a $10 bill in his wallet.
Gilberto has $3,000 in a savings account.

Answer 1

Juanita has $8,000 in a six-month certificate of deposit (CD)

Conclusion: M2

Charles has a $10 bill in his wallet.

Conclusion: M1

Gilberto has $3,000 in a savings

Conclusion: M2

Definition of Terms

M1 money supply are those monies that are liquid such as cash and demand deposits.

M2 money supply are less liquid in nature and includes M1 + savings and time deposits, certificates of deposits, and money market funds.