An economist notices that M1 is rapidly rising. One conclusion she might draw is that
A) depositors want to save for the long term.
B) interest rates on savings accounts are rising.
C) consumers are preparing to make more purchases.
D) banks are discouraging their customers from borrowing and spending.

Question

Quizplus · Accepted Answer

M1 includes currency in circulation, traveler's checks, and demand deposits. A rapid increase in M1 suggests that consumers are likely withdrawing money from their demand deposit accounts to make more purchases. This could be a sign of higher consumer confidence or an increase in economic activity.

An Economist Notices That M1 Is Rapidly Rising