ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -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.

Detailed explanation-2: -M1 is the most liquid and makes transactions the easiest, while M4 is the least liquid. The most commonly used indicator of the money supply is M3. It is also known as the total amount of financial resources.

Detailed explanation-3: -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-4: -Cash in hand is considered the most liquid asset in accounting.