Gross Domestic Product in the U.S. is roughly:
A) equal to M1.
B) twice as large as M2.
C) equal to M2.
D) more than six times M1.

Question

Quizplus · Accepted Answer

Gross Domestic Product (GDP) is the total value of goods and services produced within a country's borders in a given time period. M1 is a measure of the money supply that includes all physical currency, demand deposits, and traveler's checks held by consumers and businesses. M2 is a broader measure that includes M1 plus savings deposits, money market funds, and small time deposits. GDP is much larger than M1 since it includes all economic activity in the country, including purchases made with credit or other forms of payments that are not included in M1. Therefore, D is the best choice as it states that GDP is more than six times M1.

Gross Domestic Product in the U.S. Is Roughly