Reading 24: Money, the Price Level, and Inflation-LOS b 习题精 2011, following, measures, discuss

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Session 6: Economics: Monetary and Fiscal Economics
Reading 24: Money, the Price Level, and Inflation

LOS b: Describe the components of the M1 and M2 measures of money and discuss why checks and credit cards are not counted as money.

 

 

Which of the following items is least likely to be included in the M2 measure of the money supply?

A) Money market mutual fund balances.

B) Time deposits.

C) Governmental checking account deposits.

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Governmental checking account deposits are not included in either the M1 or the M2 measures of money supply. Both remaining items are included in M2.

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The M2 measure of the United States money supply is least likely to include:

A) time deposits.

B) traveler’s checks.

C) outstanding checks.

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Outstanding checks are not counted as money. M2 includes all the components of the M1 money supply (currency not held at banks, travelers’ checks, private checking accounts) along with savings deposits, time deposits, and money market mutual fund balances.

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Which of the following items is least likely to be included in the M1 measure of the money supply?

A) Currency held at banks.

B) Checking account deposits owned by businesses.

C) Travelers’ checks.

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Currency held at banks is not counted in the M1 measure of the money supply. Both remaining items are included in M1.

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Which of the following statements is most accurate with respect to the measures of the money supply?

A) Checking account deposits owned by firms and government are included in M1, but those of individuals are not.

B) When a firm writes a check to an individual, the M1 measure is increased.

C) M2 includes M1 plus time deposits, savings deposits, and money market mutual fund balances.

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The statement that M2 includes M1 plus time deposits, savings deposits, and money market mutual fund balances is correct. Writing a check does not increase the money supply, it merely transfers funds from one party to another. Likewise, using a credit card does not increase the money supply. Checking balances owned by individuals and firms are included in M1, but those of government are not.

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