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Financial Markets: NYSE Composite Index and Financial Systems

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Financial Markets: NYSE Composite Index and Financial Systems

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Questions and Answers

What is the primary purpose of the M1 monetary aggregate?

To measure the total value of goods and services in an economy

To track the amount of money invested in financial markets

To capture the money that is readily available for immediate spending on goods and services (correct)

To calculate the inflation rate of an economy

What type of deposits are included in M1 but not in other types of checking accounts?

Demand deposits (correct)

Money market deposit accounts

Savings deposits

Time deposits

What is the main difference between M1 and M2?

M1 includes only highly liquid assets, while M2 includes slightly less liquid assets (correct)

M1 is used for saving, while M2 is used for daily transactions

M1 includes only currency, while M2 includes all types of money

M1 is used for international transactions, while M2 is used for domestic transactions

What is the purpose of traveler's checks?

To use when traveling, accepted worldwide Signup and view all the answers

What is the definition of liquidity in the context of measuring money?

The ability to convert an asset into cash quickly Signup and view all the answers

What is the formula for M1?

M1 = currency + traveler's checks + demand deposits + other checkable deposits Signup and view all the answers

What type of deposits are included in M2 but not in M1?

Small denomination time deposits Signup and view all the answers

What is the main characteristic of money market deposit accounts?

They earn interest and can be used for saving Signup and view all the answers

What is the primary difference between demand deposits and other checkable deposits?

Demand deposits can be withdrawn on demand, while other checkable deposits cannot Signup and view all the answers

Why is M1 considered a measure of money's role as a medium of exchange?

Because it captures the money that is readily available for immediate spending on goods and services Signup and view all the answers