BANKING GENERAL KNOWLEDGE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Currency and coins
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Corporate bonds held by firms and individuals
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Demand deposits
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Money market mutual fund shares
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Detailed explanation-1: -The correct answer is option B) Savings bonds. Always remember that everything in M1 plus the following is included in M2. Savings bond are not part of the monetary aggregate.
Detailed explanation-2: -M2 includes all of M1, plus savings deposits, time deposits like certificates of deposit, and money market funds.
Detailed explanation-3: -Physical currency, coins, traveler’s checks, demand deposits, and other checkable deposits are included in M1 money. M1 includes all money that is highly liquid or can be converted into cash readily. It does not include any financial assets like bonds and savings accounts. Time deposits are included in M2 money.
Detailed explanation-4: -M2 is a measure of the U.S. money stock that includes M1 (currency and coins held by the non-bank public, checkable deposits, and travelers’ checks) plus savings deposits (including money market deposit accounts), small time deposits under $100, 000, and shares in retail money market mutual funds.