Comparing M1 and M2 we know that
A) M2 is larger because it contains more liquid assets than does M1.
B) M2 is larger because it contains M1 and other assets.
C) M2 is approximately equal to M1.
D) M1 is larger because it contains currency.

Question

Quizplus · Accepted Answer

M2 is larger than M1 because it includes all the components of M1 (currency, demand deposits, and traveler's checks) plus other assets like small time deposits, savings deposits, and money market mutual funds. Therefore, option B is the correct answer.

Comparing M1 and M2 We Know That