Bank reserves are:
A) not part of M1 or M2.
B) part of M2 but not M1.
C) M1 plus time deposits.
D) part of M1 but not M2.

Question

Quizplus · Accepted Answer

Bank reserves are not counted in M1 or M2 money supply measures. M1 includes liquid forms of money, such as cash and checking deposits, while M2 includes M1 plus savings deposits, money market securities, and other types of near money. Bank reserves, however, are funds that banks hold in their accounts with the central bank or in cash in their vaults, which are not directly accessible for spending by businesses or consumers, hence not included in M1 or M2.

Bank Reserves Are