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Chapter 24: Problem 8

Which of the following is part of the M2 definition of the money supply, but not part of M1? a. Checkable Deposits b. Currency held in banks c. Currency in circulation d. Money market mutual fund shares

Short Answer

Expert verified
The correct answer is option D: Money market mutual fund shares, as they are part of the M2 money supply but not the M1 money supply.

Step by step solution

01

Option A: Checkable Deposits

Checkable deposits are the accounts in which you may write checks payable on demand. These deposits are a part of both M1 and M2 definitions, as they are considered a liquid form of money. So option A is not the correct answer.
02

Option B: Currency held in banks

Currency held in banks is the amount of cash kept in the banks' vaults. This currency is not in circulation, so it is not considered a part of either M1 or M2 money supply. Therefore, option B is not the correct answer.
03

Option C: Currency in circulation

Currency in circulation refers to all physical currency - i.e., banknotes and coins - that is out and not held in banks' vaults. This is considered a very liquid form of money and is included in both M1 and M2 definitions. So option C is not the correct answer.
04

Option D: Money market mutual fund shares

Money market mutual fund shares represent investments in short-term debt securities and are considered less Liquid compared to other components in the M1 definition. They are part of the M2 money supply but not the M1 money supply, and therefore, option D should be the correct answer. So, the correct answer to this question is: Option D: Money market mutual fund shares.

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Most popular questions from this chapter

Which definition of the money supply includes credit cards, or "plastic money"? a. \(\mathrm{M} 1\) b. \(\mathrm{M} 2\) c. All of the above d. None of the above

The M1 definition of the money supply consists of a. coins and currency in circulation. b. coins and currency in circulation, checkable deposits, and traveler's checks. c. Federal Reserve notes, gold certificates, and checkable deposits. d. Federal Reserve notes and bank loans.

M1 refers to a. the most narrowly defined money supply. b. currency held by the public plus checking account balances and traveler's checks. c. the smallest dollar amount of the money supply definitions. d. all of the above.

Which of the following is a problem with barter? a. Individuals will not exchange goods. b. Individuals' wants must coincide in order for there to be exchange. c. Goods can be exchanged, but services cannot. d. None of the above is a problem.

Which of the following is not one of the functions of the Federal Reserve? a. Clearing checks b. Printing currency c. Supervising and regulating banks d. Controlling the money supply
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