ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -M1 and M2 money are the two mostly commonly used definitions of money. M1 = coins and currency in circulation + checkable (demand) deposit + traveler’s checks. M2 = M1 + savings deposits + money market funds + certificates of deposit + other time deposits.

Detailed explanation-2: -The M1 money supply includes all physical currency, traveler’s checks, demand deposits, and other checkable deposits (e.g. checking accounts). While the M1 is a measure of all the most liquid forms of money in an economy, other forms of money supply are slightly different.

Detailed explanation-3: -These items together-currency, and checking accounts in banks-make up the definition of money known as M1, which is measured daily by the Federal Reserve System. Traveler’s checks are a also included in M1, but have decreased in use over the recent past.

Detailed explanation-4: -M1 money supply includes coins and currency in circulation-the coins and bills that circulate in an economy that are not held by the U.S. Treasury, at the Federal Reserve Bank, or in bank vaults. Closely related to currency are checkable deposits, also known as demand deposits.

Detailed explanation-5: -We measure money with several definitions: M1 includes currency and money in checking accounts (demand deposits). Traveler’s checks are also a component of M1, but are declining in use. M2 includes all of M1, plus savings deposits, time deposits like certificates of deposit, and money market funds.