Which of the following statements is true?

Question

Quizplus · Accepted Answer

Reserve balances, which are the balances held by banks at the central bank, are indeed included in broader measures of the money supply, such as M2 or M3, depending on the country's specific definitions. However, the statement is phrased in a way that makes it true by stating they are "not included in measures of money supply," which is incorrect as a general statement but correct in the context of narrower measures like M1. The other options are incorrect: Cash in circulation is a fundamental component of the money supply (making A incorrect); narrow measures of money typically focus on the most liquid assets, not including all banking deposits (making B incorrect); and the level of minimum reserve requirements is decided by the central bank or monetary authority, not commercial banks (making D incorrect).

Which of the Following Statements Is True