The monetary aggregate M2 is defined as

Question

Quizplus · Accepted Answer

M2 is a broader measure of money supply that includes M1 (currency in circulation plus demand deposits) as well as other highly liquid assets that can be easily converted into cash or M1. These include saving deposits, small time deposits, and money market mutual funds, which are all close substitutes for M1 and can be easily converted into it. Therefore, B is the best choice as it accurately defines M2. The other options either miss some components of M2 or include assets that are not easily convertible into M1 or used for day-to-day transactions.

The Monetary Aggregate M2 Is Defined as