The distinction between M1 and M2 has blurred over time because:

Question

Quizplus · Accepted Answer

Depositors can easily transfer funds between accounts, which blurs the distinction between M1 and M2. For example, if someone has a savings account and a checking account at the same bank, they can easily transfer funds from the savings account to the checking account to make a purchase, blurring the line between M1 (cash and checking deposits) and M2 (M1 plus savings deposits and money market mutual funds).

The Distinction Between M1 and M2 Has Blurred Over Time