Which of the following statements is CORRECT?
A) M2 measures assets primarily used as a medium of exchange.
B) M2 includes M1.
C) M1 includes assets primarily used as a means of saving.
D) The Federal Reserve discontinued reporting on M1 and M2 because they provide little insight into the state of the economy.

Question

Quizplus · Accepted Answer

M2 includes all of the assets in M1 (cash, checking accounts, and traveler's checks), plus savings accounts, certificates of deposit, and money market accounts. Therefore, statement (B) is correct. Statement (A) is incorrect because M2 measures all of the assets in M1 plus additional assets, not just those primarily used as a medium of exchange. Statement (C) is incorrect because M1 includes assets primarily used as a medium of exchange, not as a means of saving. Statement (D) is incorrect because the Federal Reserve still reports on M1 and M2 as important measures of the money supply and indicators of economic activity.

Which of the Following Statements Is CORRECT