If a sizeable amount of U.S. currency is held outside of the United States,
A) the accuracy of the M2 money supply figures will be improved, but there will be no impact on M1.
B) the accuracy of the M1 money supply figures will be improved, but there will be no impact on M2.
C) the money supply figures, particularly those for M1, will be less reliable.
D) the money supply figures of the U.S. will not be affected because the funds are held outside the U.S.

Question

Quizplus · Accepted Answer

If a sizeable amount of U.S. currency is held outside of the United States, it will affect the reliability of the money supply figures, particularly those for M1. This is because M1 includes physical currency held by the public and in foreign countries, so it will be difficult to accurately measure the amount of currency in circulation. M2, on the other hand, includes M1 plus other forms of money, such as deposits in savings accounts, which are less likely to be held outside of the United States. Therefore, the accuracy of M2 money supply figures will not be significantly impacted.

If a Sizeable Amount of U