The M₂ definition of the money supply is based on the concept that A)M₁ is a small number and should be increased in size. B)many types of deposits can be used as both payments and stores of value. C)checking deposits are used for payments, and therefore, not part of M₁. D)cash is not used for the majority of payments.

Question

Quizplus · Accepted Answer

The M₂ definition of the money supply includes different types of deposits that can be used both as a means of payment and as a store of value, such as savings deposits or time deposits. This is in contrast to the narrowest definition of the money supply (M₁), which only includes currency in circulation and demand deposits (checking accounts). While checking deposits are primarily used for payments, other types of deposits can also be used for payments and are therefore considered part of the broader definition of the money supply.

The M2 Definition of the Money Supply Is Based on the Concept

The M₂ Definition of the Money Supply Is Based on the Concept