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Chapter 1: Q.11 (page 9)

What components of money do we count in M2?

Short Answer

Expert verified

M2 is a comprehensive of M1, certificate of deposits, time deposits, money market fund and savings.

Step by step solution

01

 : Concept Introduction

M1 term is usually used to explain money which includes circulation of currency and coins, accounts checking etc.

M2is a broader concept of money as compared to M1.

02

Formula

The components in money counted in M2 are to be determined.

M2 is a comprehensive of M1, certificate of deposits, time deposits, money market fund and savings.

So, M2 can be formulate as below;

M2=Coins and currency in circulation + demand deposit+traveller's check + Savings and time deposits+certificates of deposits + money market funds

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