Demand deposits are included in
A)M1 but not M2.
B)M2 but not M1.
C)M1 and M2.
D)neither M1 nor M2.

Question

Quizplus · Accepted Answer

Demand deposits, which are checking account deposits that can be withdrawn at any time without prior notice, are included in both M1 and M2 measures of the money supply. M1 includes only the most liquid forms of money, such as currency, traveler's checks, and demand deposits, while M2 includes all of M1 plus less liquid forms, such as savings deposits, time deposits, and money market funds.

Demand Deposits Are Included in