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M2 is made up of which of these?
AAll of M1 plus time deposits and less liquid money
BAll of M1 minus the currency held by the public
COnly the money that can be spent immediately
DOnly deposits that pay interest to the depositor
Answer & Solution
Correct answer: A. All of M1 plus time deposits and less liquid money
1. M2 includes all M1 monies plus time deposits and other money that is not immediately accessible.
2. So M2 is always the wider measure and can never be smaller than M1.
3. Money that can be spent immediately on its own is M1, which is the narrower measure.
4. M2 is not restricted to interest paying balances, because it carries all the currency inside M1 as well.
_Source: OpenStax Introduction to Business (CC BY 4.0), Ch 15 "Understanding Money and Financial Institutions", section 15.1 Show Me the Money_
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