Question

Money stock Identify whether each of the following examples belongs in M1 or M2. If an example belongs in both, be sure to check both boxes. Example M1 M2 Kenji has $25,000 in a money market account. Lucia has $8,000 in a two-year certificate of deposit (CD). Eric has a roll of quarters that he just withdrew from the bank to do laundry.

Answer 1

Answer:

For Kenji he falls on the category M2, for Lucia it's M2, and for Eric belongs to the category of both M1 and M2 respectively.

Explanation:

M1 money supply comprises of  currency in physical form and coin, the demand deposit( check-able) travelers check

M2 money supply comprises of  Certificate deposit and M1, savings, money market funds, and time deposits for example, M2 money supply comprises   money.  that is less liquid/

• Kenji has $25000 in a money market account - it belongs to the category of  M2 money supply.

•  Lucia has $8000 in a two year CD, it belongs to the category - M2  which is money supply

• Eric withdrew money from the bank to do laundry. The money he took will go to cash that is available or in the economy at that time or the  physical currency. these category belongs in M1. As M2 money supply contains  M1 therefore this example also belongs in M2.