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Chapter 24: Problem 9

Which of the following is not part of M1? a. Checking accounts b. Coins c. Credit cards d. Paper currency

Short Answer

Expert verified
Option C: Credit cards are not part of M1 money supply because they are a form of credit rather than an immediately accessible form of currency.

Step by step solution

01

Understand M1 Money Supply

M1 money supply is a measure of the most liquid forms of money, such as currency in circulation and demand deposits. This includes physical currency (coins and paper currency) and non-physical currency that is immediately accessible for transactions (checking accounts).
02

Evaluate Option A: Checking Accounts

Checking accounts are considered part of the M1 money supply because they are immediately accessible for transactions and represent liquid forms of money. So, option A is not the correct answer.
03

Evaluate Option B: Coins

Coins are physical currency and are included in the M1 money supply as they represent the most liquid form of money. Therefore, option B is not the correct answer.
04

Evaluate Option C: Credit Cards

Credit cards are not considered part of the M1 money supply because they are a form of credit rather than an immediately accessible form of currency. Credit cards essentially represent a short-term loan that needs to be repaid later, so they do not fit the definition of M1 money. Therefore, option C is the correct answer.
05

Evaluate Option D: Paper Currency

Paper currency is a physical form of currency, and it is included in the M1 money supply as it represents the most liquid form of money. So, option D is not the correct answer.
06

Conclusion

Among the given options, the one that is not a part of M1 is the credit card (Option C). Hence, the correct answer is Option C: Credit cards.

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Most popular questions from this chapter

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 these institutions has the responsibility to control the money supply? a. Commercial banks b. Congress c. U.S. Treasury Department d. Federal Reserve System

Which of the following is in charge of the buying and selling of government securities by the Fed? a. The president b. Federal Open Market Committee (FOMC) c. Congress d. None of the above

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
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