Krugman's Economics For The Ap® Course
3rd Edition
ISBN: 9781319113278
Author: David Anderson, Margaret Ray
Publisher: Worth Publishers
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Question
Chapter 5R, Problem 11MCQ
To determine
The correct option that defines the M1 money supply.
Expert Solution & Answer
Answer to Problem 11MCQ
Option b is correct.
Explanation of Solution
Explanation for the correct option:
b.
M1 supply is a narrower concept that includes only cash and checking deposits. The M1 supply of money is more liquid as compared to the M2 money supply. Therefore, option b is correct.
Explanation for incorrect options:
a.
Near money includes savings and time deposits with banks or other institutions. This falls under the M2 money supply category. Therefore, option a is incorrect.
c.
Saving deposits are less liquid as compared to cash or checking deposits. So, they fall under M2 supply. Therefore, option c is incorrect.
d.
Time deposits are less liquid as compared to cash or checking deposits. So, they fall under M2 supply. Therefore, option d is incorrect.
e.
Mutual funds are more illiquid in nature due to which they fall under the M2 money supply category. Therefore, option e is incorrect.
Economics Concept Introduction
Characteristics of money: Main characteristics of money refer to the traits that money should possess which include durability, being portable, divisible, uniform, and acceptable, and has limited supply.
M1 money supply: M1 money supply considers only cash and checking deposits whereas M2 is the broader aspect of money supply that includes time deposits,
Chapter 5R Solutions
Krugman's Economics For The Ap® Course
Ch. 5R - Prob. 1MCQCh. 5R - Prob. 2MCQCh. 5R - Prob. 3MCQCh. 5R - Prob. 4MCQCh. 5R - Prob. 5MCQCh. 5R - Prob. 6MCQCh. 5R - Prob. 7MCQCh. 5R - Prob. 8MCQCh. 5R - Prob. 9MCQCh. 5R - Prob. 10MCQ
Ch. 5R - Prob. 11MCQCh. 5R - Prob. 12MCQCh. 5R - Prob. 13MCQCh. 5R - Prob. 14MCQCh. 5R - Prob. 15MCQCh. 5R - Prob. 16MCQCh. 5R - Prob. 17MCQCh. 5R - Prob. 18MCQCh. 5R - Prob. 19MCQCh. 5R - Prob. 20MCQCh. 5R - Prob. 21MCQCh. 5R - Prob. 22MCQCh. 5R - Prob. 23MCQCh. 5R - Prob. 24MCQCh. 5R - Prob. 25MCQCh. 5R - Prob. 1FRQCh. 5R - Prob. 2FRQCh. 5R - Prob. 3FRQCh. 5R - Prob. 1CTQCh. 5R - Prob. 2CTQCh. 5R - Prob. 3CTQCh. 5R - Prob. 4CTQ
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