Economists who prefer a broader definition of money prefer the:
A) M1 measure of the money supply to the M4 measure.
B) M2 measure of the money supply to the M1 measure.
C) M3 measure of the money supply to the M2 measure.
D) M1 measure of the money supply to the M2 measure.

Question

Quizplus · Accepted Answer

Economists who prefer a broader definition of money would prefer the M2 measure of the money supply to the M1 measure as M2 includes all components of M1 (currency, demand deposits, and other checkable deposits) as well as other assets that are highly liquid but not considered cash, such as savings deposits, money market deposit accounts, and small time deposits. This broader definition of money reflects a more realistic view of the assets that households and businesses use for transactions and as a store of value.

Economists Who Prefer a Broader Definition of Money Prefer The