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

Question

Quizplus · Accepted Answer

M2 is larger than M1 because it includes all the components of M1 (currency, demand deposits, and other liquid monies) plus additional assets such as savings deposits, money market securities, and other time deposits, which are not as liquid as the components of M1 but still part of the money supply.

Comparing M1 and M2 We Know That