Statement I: Large denomination CDs are not part of M2,but are part of M3.
Statement II: Small denomination CDs are part of M2,but not of M3.

Question

Quizplus · Accepted Answer

Statement I is true. Large denomination CDs are time deposits with face values of $100,000 or more and are not easily convertible into cash, so they are not included in M2, which represents the most liquid forms of money supply. However, they are included in M3, which is a broader measure of money supply that includes less liquid forms of money like time deposits with high face values.

Statement II is false. Small denomination CDs are time deposits with face values of less than $100,000 and are easily convertible into cash, so they are included in M2, which represents highly liquid forms of money supply. However, they are not included in M3, which only includes time deposits with high face values.

Statement I: Large Denomination CDs Are Not Part of M2,but