ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -M1 includes currency i.e. banknotes and coins, plus overnight deposits.

Detailed explanation-2: -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-3: -The following are NOT part of M1: currency in banks. currency and checkable deposits owned by the government. currency and checkable deposits owned by the Federal Reserve Banks.

Detailed explanation-4: -M1 includes currency, coins, gold and silver, whereas M2 does not contain gold and silver. M1 is made up of currency, traveler’s checks, and money in checkable accounts, whereas M2 contains M1 plus savings deposits and time deposits.