Which of the following is true?

Question

Quizplus · Accepted Answer

M2 is a broader measure of money supply that includes M1 (currency, demand deposits, and other checkable deposits) along with savings accounts, time deposits, and money market mutual funds.

Answer: C
 The reserve requirement is the percentage of deposits that banks are required to hold as reserves (either with the Fed or in their own vaults). The simple deposit multiplier is determined by dividing the amount of deposits by the required reserve ratio, so reserves times the required reserve ratio equals deposits.

Answers A and D are incorrect:
A) Deposits (both checking and time deposits) are liabilities of banks, not assets.
D) Money is not destroyed when banks make loans; instead, the money supply increases because loans create new deposits.

Which of the Following Is True