ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -M1 includes less liquid assets like savings deposits, while M2 includes liquid assets like currency.

Detailed explanation-2: -M2 consists of M1 plus (1) small-denomination time deposits (time deposits in amounts of less than $100, 000) less individual retirement account (IRA) and Keogh balances at depository institutions; and (2) balances in retail money market funds (MMFs) less IRA and Keogh balances at MMFs.

Detailed explanation-3: -In this case, M1 includes more liquid money, such as coins or notes. On the other hand, M2 or M3, such as money market funds, are less liquid. In the U.S., M2 and M3 are defined as broad money, and M3 includes the broadest form of an economy’s money supply.

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.

Detailed explanation-5: -M1 and M2 are two measures of money supply. M1 includes only the most liquid forms of money like currency, checking account deposits, and traveler’s checks. M2 includes all of M1 along with some less liquid forms of money like savings accounts and money market deposits.