Savings deposits sit in M2 rather than M1 because they cannot directly serve as a:
AForm of saving
BMedium of exchange
CStore of value
DUnit of account
Answer & Solution
Correct answer: B. Medium of exchange
1. The M1 and M2 boundary tracks spendability.
2. M1 includes checkable deposits, which one can easily use as a medium of exchange.
3. M2 includes savings deposits in banks.
4. Those are accounts on which you cannot write a check directly.
5. So they cannot directly serve as a medium of exchange, and fall outside M1.
_Source: OpenStax Principles of Macroeconomics for AP Courses 2e (CC BY 4.0), Ch 13 'Money and Banking'_
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