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.

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: -M2 money supply is the money supply that includes currency, checking accounts in banks, traveler’s checks, savings deposits, money market funds, and certificates of deposit.

Detailed explanation-4: -Answer and Explanation: The correct answer is (E) Credit cards.

Detailed explanation-5: -Money is measured 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.