Many economists believe that savings accounts should be added to M1 because they
A) are larger in size than conventional checking accounts.
B) pay larger interest than checking accounts.
C) can be transferred quickly into checkable accounts.
D) are also insured by the federal government.

Question

Quizplus · Accepted Answer

Savings accounts can be quickly and easily transferred into checkable accounts, making them a very liquid asset. This makes them similar to other assets included in M1, such as traveler's checks and demand deposits. Therefore, many economists believe that savings accounts should be added to M1. Choices A, B, and D are not accurate reasons for why savings accounts should be added to M1.

Many Economists Believe That Savings Accounts Should Be Added to M1