Which measure of money includes savings deposits and money market funds?

Which measure of money includes savings deposits and money market funds?

• A. M1
• B. M2
• C. M3
• D. M4

Answer: (B)

The measure of money that includes savings deposits and money market funds is M2. M2 is a broader classification of money than M1, encompassing not only physical currency and demand deposits but also savings accounts, time deposits under $100,000, and various other types of near-money assets. This inclusion of savings deposits and money market funds reflects a larger segment of the money supply that can be readily converted into cash or is highly liquid. M1 focuses primarily on the most liquid forms of money, such as cash and checking accounts, while M2 builds on this by also incorporating assets that are slightly less liquid but still readily accessible for spending and investment. This broader view of the money supply provides a more comprehensive perspective on the available funds in the economy, which can be useful for analyzing economic conditions and monetary policy.

The measure of money that includes savings deposits and money market funds is M2. M2 is a broader classification of money than M1, encompassing not only physical currency and demand deposits but also savings accounts, time deposits under $100,000, and various other types of near-money assets. This inclusion of savings deposits and money market funds reflects a larger segment of the money supply that can be readily converted into cash or is highly liquid.

M1 focuses primarily on the most liquid forms of money, such as cash and checking accounts, while M2 builds on this by also incorporating assets that are slightly less liquid but still readily accessible for spending and investment. This broader view of the money supply provides a more comprehensive perspective on the available funds in the economy, which can be useful for analyzing economic conditions and monetary policy.