Checking account deposits are counted as part of the M1 money supply because
A) they earn interest income for the depositor.
B) they are widely used as a means of making payment.
C) banks hold currency equal to the value of their outstanding checking account deposits.
D) they are ultimately the obligations of the Treasury.

Question

Quizplus · Accepted Answer

Checking account deposits are included in the M1 money supply because they are widely used as a means of making payments. M1 includes the most liquid forms of money that can be easily accessed and spent, and checking account deposits fit this criterion. The other choices are not valid reasons for why checking account deposits are included in M1.

Checking Account Deposits Are Counted as Part of the M1