Question

Which of the following is NOT considered part of M2? a. currency b. checkable deposits c....

Which of the following is NOT considered part of M2?

a.

currency

b.

checkable deposits

c.

money

d.

traveler’s checks

e.

credit cards

Homework Answers

Answer #1

Option E.

  • We know that M1 includes all the liquid assets like currency, travellers cheques, Checkable deposits etc, while M2 money supply includes M1 plus other assets that are less liquid than M1 which includes money market funds, time deposits, certificates of deposit etc.
  • Credit card is not considered as a part of M2, nor it is considered under any type of money supply because, credit cards are liabilities and hence cannot be easily converted into cash when required.
  • We know that money supply only counts those asset's that can be easily converted into cash when required, hence credit cards are not considered as a part of M2.
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