Which of the following is NOT included in either M1 or M2 measures of the money supply?
A
Demand deposits
B
Savings deposits
C
Credit card balances
D
Currency in circulation
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1
Step 1: Understand the definitions of M1 and M2 money supply measures. M1 typically includes the most liquid forms of money such as currency in circulation and demand deposits (checking accounts).
Step 2: Recognize that M2 includes everything in M1 plus additional slightly less liquid assets like savings deposits, small time deposits, and certain money market funds.
Step 3: Identify each option and determine if it fits into M1 or M2. Demand deposits and currency in circulation are part of M1, while savings deposits are included in M2.
Step 4: Understand the nature of credit card balances. Credit card balances represent borrowed money (debt), not money held or saved, so they are not included in M1 or M2.
Step 5: Conclude that credit card balances are NOT part of either M1 or M2 money supply measures because they represent liabilities rather than liquid assets.