ECONOMICS
MONETARY POLICY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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M1
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liquidity
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M2
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store of value
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Detailed explanation-1: -M1 is the money supply that encompasses physical currency and coin, demand deposits, traveler’s checks, and other checkable deposits. A monetary base is the total amount of a currency in general circulation or in the commercial bank deposits held in the central bank’s reserves.
Detailed explanation-2: -M1 money supply includes those monies that are very liquid such as cash, checkable (demand) deposits, and traveler’s checks M2 money supply is less liquid in nature and includes M1 plus savings and time deposits, certificates of deposits, and money market funds.
Detailed explanation-3: -M1 is the money supply that is composed of currency, demand deposits, other liquid deposits-which includes savings deposits. M1 includes the most liquid portions of the money supply because it contains currency and assets that either are or can be quickly converted to cash.
Detailed explanation-4: -M1 money supply includes those monies that are very liquid such as cash, checkable (demand) deposits, and traveler’s checks. M2 money supply is less liquid in nature and includes M1 plus savings and time deposits, certificates of deposits, and money market funds.