Reading 24: Money, Banks, and the Federal Reserve - LOS b class, following, included, likely

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

A)   Time deposits.

B)   Savings deposits.

C)   Money market mutual fund balances.

D)   Governmental checking account deposits.

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

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

B)   When an individual pays for a transaction at a business with a credit card, the M2 measure is increased.

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

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

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

A)   Currency in circulation.

B)   Travelers’ checks.

C)   Currency held at banks.

D)   Checking account deposits owned by businesses.

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答案和详解如下：

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

A)   Time deposits.

B)   Savings deposits.

C)   Money market mutual fund balances.

D)   Governmental checking account deposits.

The correct answer was D)

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

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

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

B)   When an individual pays for a transaction at a business with a credit card, the M2 measure is increased.

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

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

The correct answer was C)

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.

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

A)   Currency in circulation.

B)   Travelers’ checks.

C)   Currency held at banks.

D)   Checking account deposits owned by businesses.

The correct answer was C)

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