ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -M2 is a measure of the money supply that includes cash, checking deposits, and other types of deposits that are readily convertible to cash such as CDs. M1 is an estimate of cash and checking account deposits only. The weekly M2 and M1 numbers are closely monitored as indicators of the overall money supply.

Detailed explanation-2: -M1, M2 and M3 are measurements of the United States money supply, known as the money aggregates. M1 includes money in circulation plus checkable deposits in banks. M2 includes M1 plus savings deposits (less than $100, 000) and money market mutual funds. M3 includes M2 plus large time deposits in banks.

Detailed explanation-3: -M1 includes those assets that are the most liquid such as cash, checkable (demand) deposits, and traveler’s checks. M2 includes M1 plus some less liquid (but still fairly liquid) assets, including savings and time deposits, certificates of deposit, and money market funds.

Detailed explanation-4: -Narrow money is also known as M1 and M2. Broad money means M3 and M4. The liquidity of these grades is decreasing. M1 is the most liquid and makes transactions the easiest, while M4 is the least liquid.