Question

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 Deborah has S6,000 in a six-month certificate of deposit (CD). Van has a roll of quarters that he just withdrew from the bank to do laundry. Carlos has $2,000 in a savings account.

Answer 1

Answer:

• Carlos has $2,500 in a savings account. - M2
• Deborah has $9,000 in a six-month certificate of deposit (CD). - M2
• Van has a roll of quarters that he just withdrew from the bank to do laundry. - M1, M2

Explanation:

M1 and M2 are symbols that represent, in economics, the means of payment. M1 refers to a set of banknotes and coins that are held by the public and are deposited in a banking system, which holds them for a certain time, referring to a monetary base, for example: Carlos has $ 2,500 in a savings account, and, Van has a roll of quarters that he just withrew from the bank to do laundry.

M2 on the other hand, houses the concept shown in M1, but it also houses a concept related to the total deposits made in a bank, which are within a time limit. M2 includes the issuance of bank certificates and government bonds. Some examples are: Deborah has $ 9,000 in a six-month certificate of deposit (CD), and, Van has a roll of quarters that he just withrew from the bank to do laundry.