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Chapter 25: Problem 3

Briefly explain whether each of the following is counted in M1. a. The coins in your pocket b. The funds in your checking account c. The funds in your savings account d. The traveler's checks that you have left over from a trip e. Your Citibank Platinum MasterCard

Short Answer

Expert verified
a. Yes, it is part of M1. b. Yes, it is part of M1. c. No, it's not part of M1. d. Yes, it is part of M1. e. No, it's not part of M1.

Step by step solution

01

Analyzing the Coins in Your Pocket

The coins in your pocket are physical money. As such, they are part of M1.
02

Analyzing the Funds in Your Checking Account

The funds in checking accounts are part of M1. They are liquid assets and can be used directly to purchase goods and services.
03

Analyzing the Funds in Your Savings Account

The funds in the savings account do not fall under M1. Even though these are liquid, they are not directly used for transactions, hence, not part of M1.
04

Analyzing the Traveler's Checks

Traveler's checks are part of M1 because they are easily convertible into cash and used for payments directly.
05

Analyzing Your Citibank Platinum MasterCard

The Citibank Platinum MasterCard itself is not included in M1, as it represents an ability to borrow, not a store of money.

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Most popular questions from this chapter

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