To evaluate: The difference between M1 and M 2.
Explanation of Solution
M1 is the smallest concept of the supply of money; it consists of money that can be immediately expended and against which controls can be published. It is about the supply of physical resources. It may include any kind of the following item like the cash, coins, demand deposits, traveler checks, and even account checks. It’s most important attribute to understand is the converting to physical currency from accounts and assets. Also known as liquidity, it easily becomes something that can keep in pocket. As M2 might be it's not "near money."
M2 is the wider concept of money supply; it includes all M1 plus near-money such as savings deposits, small denomination time deposits, bank accounts for the
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