Are mutual funds part of M2?
M2 is a classification of money supply. It includes M1 – which is comprised of cash outside of the private banking system plus current account deposits – while also including capital in savings accounts, money market accounts and retail mutual funds, and time deposits of under $100,000.
M1 includes money in circulation plus checkable deposits in banks. M2 includes M1 plus savings deposits (less than $100,000) and money market mutual funds.
M2 is a measure of the U.S. money stock that includes M1 (currency and coins held by the non-bank public, checkable deposits, and travelers' checks) plus savings deposits (including money market deposit accounts), small time deposits under $100,000, and shares in retail money market mutual funds.
Answer and Explanation:
The answer is d) Credit card balances. In macroeconomics, as measures of amount of money flowing in an economy, M1 and M2 include currency, deposits, and some other categories.
M2 consists of M1 plus (1) small-denomination time deposits (time deposits in amounts of less than $100,000) less individual retirement account (IRA) and Keogh balances at depository institutions; and (2) balances in retail money market funds (MMFs) less IRA and Keogh balances at MMFs.
Answer and Explanation: Retail money market mutual funds are investments and take time to convert to cash, and hence, are not included in M1.
M1 Finance does not currently support mutual funds. Learn more about securities we support on M1.
The correct answer is credit cards. Credit cards are not included in M2. M2 includes savings deposit...
Gold is not counted in M1, M2, or M3. In the modern world, gold is no longer used as a common currency.
The retail money funds component of M2 is constructed from weekly data collected by the Investment Company Institute (ICI), a trade association for the investment company industry. The retail money funds component of M2 excludes IRA and Keogh balances held at MMMFs, which are reported by ICI on a quarterly basis.
Does M2 include financial assets?
M2 money supply is a broader measure of the money stock within an economy, which includes all components of M1 money supply along with additional types of financial assets. M1 money supply represents the most liquid forms of money, such as physical currency (coins and banknotes) and demand deposits (checking accounts).
Option (a) a savings account is correct
This option is correct because M1 is calculated as the summation of currency, checkable deposit, traveler's check, demand deposit and negotiable order of withdrawal. Whereas, M2 is calculated as the summation of M1, saving deposit and money market mutual funds.
Historically, M1 money supply included those monies that are very liquid such as cash, checkable (demand) deposits, and traveler's checks, while M2 money supply included those monies that are less liquid in nature; M2 included M1 plus savings and time deposits, certificates of deposits, and money market funds.
The M1 money supply includes all physical currency, traveler's checks, demand deposits, and other checkable deposits (e.g. checking accounts).
It's because of Fed monetary policy. High interest rates cause M2 to fall. The Fed raises interest rates by making fewer loans to commercial banks. It can also sell bonds and take in the money from those sales.
To reduce the supply of M2 in an economy, a central bank might issue bonds or other government-backed securities which lenders can buy; in doing so, they loan the government money. This means that a central bank's money reserves increase at the expense of the money available in the economy.
A mutual fund is a type of investment company, known as an open-end fund, that pools money from many investors and invests it based on specific investment goals. The mutual fund raises money by selling its own shares to investors.
The primary asset classes in mutual funds include stocks, bonds, commodities, etc. These classes provide investors with choices to diversify their portfolios based on risk tolerance and financial goals.
Mutual funds are designed as a trust to raise monies through the sale of units to the public for the purpose of investing in securities including money market instruments or gold, in line with a well defined objective. There are some clearly demarcated units in a mutual fund like the sponsor, the AMC, the trustee etc.
Currency is the only option that is included in both M1 and M2. This is because M2 already includes M1, and currency is one of the most liquid assets in M1. Saving deposits, small-denomination time deposits, and money market deposit accounts are all part of M2 but they are not part of M1.
Does M2 include bonds?
M2 is the measure of the money supply that includes M1, time deposits less than $100,000, and retail money market funds. M2 is less restrictive than M1 but does not include stocks, bonds, and other investment accounts that M3, the broadest measure of money, includes.
M1 measurement of money supply excludes time deposits with banks as it is the most liquid money supply and time deposits are not liquid assets. Therefore, time deposits are not included in M1 measurement of money supply.
M1 money supply includes coins and currency in circulation—the coins and bills that circulate in an economy that the U.S. Treasury does not hold at the Federal Reserve Bank, or in bank vaults. Closely related to currency are checkable deposits, also known as demand deposits.
Answer and Explanation:
M2 includes M1 and near money. Saving deposits are a part of near money. Therefore, saving deposits are not part of M1 but are part of M2.
Money is measured with several definitions: M1 includes currency and money in checking accounts (demand deposits). Traveler's checks are also a component of M1, but are declining in use. M2 includes all of M1, plus savings deposits, time deposits like certificates of deposit, and money market funds.
