Monetary Aggregates: M2 Components Quiz
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Questions and Answers

What is the primary difference between M1 and M2 money supply?

  • M2 includes savings deposits, while M1 does not
  • M2 includes traveler's checks, while M1 does not
  • M2 includes money market funds, while M1 does not (correct)
  • M2 includes coins and currency in circulation, while M1 does not

    • Which of the following is not included in the M1 money supply definition?

  • Currency in circulation
  • Savings deposits (correct)
  • Coins held by the public
  • Checkable deposits

    • Why are checkable deposits also known as demand deposits?

  • Because the bank must give the deposit holder their money on demand when they write a check or use a debit card (correct)
  • Because the deposit holder can demand the bank to increase the interest rate on the checkable deposit
  • Because the deposit holder can demand the bank to convert the checkable deposit to currency
  • Because the deposit holder can demand the bank to transfer the funds to another account

    • Which of the following is not included in the M1 money supply definition?

    <p>Money market funds</p> Signup and view all the answers

    What is the relationship between M1 and M2 money supply?

    <p>M1 is a subset of M2, including only the most liquid components</p> Signup and view all the answers

    Which of the following is included in the M2 money supply definition but not the M1 definition?

    <p>Money market funds</p> Signup and view all the answers

    What is the main difference between the money in M1 and the additional money in M2?

    <p>M1 money can be withdrawn and spent more easily than M2 money</p> Signup and view all the answers

    Which of the following is NOT a component of M1 money?

    <p>Money market funds</p> Signup and view all the answers

    Which of the following is the BEST definition of M2 money according to the text?

    <p>M2 = M1 + money market funds + certificates of deposit + other time deposits</p> Signup and view all the answers

    How much larger was M2 compared to M1 in the United States at the end of November 2021?

    <p>M2 was $1.1 trillion larger than M1</p> Signup and view all the answers

    Which of the following is true about the relationship between M1 and M2 according to the text?

    <p>M1 is a subset of M2, meaning all M1 money is included in M2</p> Signup and view all the answers

    What is the primary responsibility of the Federal Reserve System with respect to M1 and M2?

    <p>To track the amounts of M1 and M2 and release weekly information about the money supply</p> Signup and view all the answers

    Which of the following is NOT a component of M1 money supply?

    <p>Savings deposits</p> Signup and view all the answers

    What is the approximate total value of M1 money supply as per the data provided?

    <p>$21.4 trillion</p> Signup and view all the answers

    Which of the following is a component of M2 but NOT M1?

    <p>Retail money market fund balances</p> Signup and view all the answers

    According to the passage, how have changes in banking practices affected the distinction between M1 and M2?

    <p>They have made savings accounts more similar to checking accounts.</p> Signup and view all the answers

    Which of the following statements is true about the definition of money supply measures like M1 and M2?

    <p>It is important to understand the strengths and limitations of the various definitions.</p> Signup and view all the answers

    Based on the data provided, what is the approximate total value of M2 money supply?

    <p>$20 trillion</p> Signup and view all the answers

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