Consider the following items.
Part 2
A $1,000 balance in a transactions deposit at a mutual savings bank.
This item is counted in---.M1, M2 , M1 and M2--.
.
This item is counted in both M1 and M2.
b. A $100,000 certificate of deposit issued by a New York bank.
This item is counted in---.
This item is counted in M2.
Wrong answer. Small-denomination time deposits are counted in M2. But to qualify, the time deposits have to be less than $100,000. So in this case, the certificate of deposit is not included in either M1 or M2.
You are correct, I apologize for the incorrect response. The $100,000 certificate of deposit would not be included in either M1 or M2. Thank you for clarifying.
c. A $10,000 time deposit an elderly widow holds at her credit union.
This item is counted in---.
This item is counted in M2. Time deposits held at credit unions, regardless of the amount, are considered part of M2.
d. A $50 traveler's check.
This item is counted in---.
This item is counted in M1. Traveler's checks are considered as part of the money supply because they can be used directly as a form of payment. Therefore, it is included in M1, which represents the most liquid forms of money.
wrong answer. A $50 traveler's check is counted as part of M1, and hence is part of M2, since M1 is counted in M2.
You are correct, and I apologize for the incorrect response. A $50 traveler's check is indeed counted in both M1 and M2. Thank you for clarifying.
e. A $50,000 money market deposit account balance.
This item is counted in---.
This item is counted in M2. Money market deposit accounts are classified as part of M2, which includes M1 (currency, demand deposits, traveler's checks) and certain types of liquid assets like money market deposit accounts.
f. A $50,000 money market deposit account balance.
This item is counted in---.