How does currency contribute to the money supply?
A) Currency held by the public and by banks is part of the money supply.
B) Currency held by the public is part of the money supply, but currency held by banks is not.
C) Currency held by the public is not part of the money supply, but currency held by banks is.
D) Currency held by the public or banks is not part of the money supply since it is not included in M1.

Question

Quizplus · Accepted Answer

Currency held by the public is considered part of the money supply because it is available for transactions and spending. However, currency held by banks is not counted in the money supply as it is considered as reserves, not actively circulating in the economy.

How Does Currency Contribute to the Money Supply