Asked by Elisa Davis on May 04, 2024
Verified
Large denomination time deposits are included in
A) M2 only.
B) M3 only.
C) M2 and M3.
D) M1 and M2.
E) M1,M2,and M3.
Large Denomination Time Deposits
Savings accounts or Certificates of Deposit (CDs) with high minimum deposit requirements, typically offering better interest rates but less liquidity.
M2
A measure of the money supply that includes cash and checking deposits as well as near money that can be easily converted to cash, like savings deposits, money market securities, and mutual funds.
M3
An indicator of the total money supply encompassing M2—which consists of cash, checking deposits, and readily convertible near money—along with substantial time deposits, institutional money market funds, and additional significant liquid assets.
- Acquire knowledge about the constituents and purposes of the money supply tiers (M1, M2, M3).
- Clarify the importance of financial instruments like Certificates of Deposit and their role in various measures of money supply.
Verified Answer
ZK
Zybrea KnightMay 05, 2024
Final Answer :
B
Explanation :
Large denomination time deposits are included in M3 only. M3 includes M2 plus large time deposits, repurchase agreements, and institutional money market funds. M2 includes M1 plus savings deposits, small time deposits, and retail money market funds. Therefore, large denomination time deposits are not included in M2, M1, or M1, M2, and M3 together.
Learning Objectives
- Acquire knowledge about the constituents and purposes of the money supply tiers (M1, M2, M3).
- Clarify the importance of financial instruments like Certificates of Deposit and their role in various measures of money supply.