Jared read an article that showed a dramatic increase in money market accounts and certificates of deposit in the last quarter. The story reported that all other major components of the U. S. money supply remained unchanged. Based on this information, Jared can conclude that for the past quarter (1) both the M-1 and the M-2 money supplies have increased. (2) the M-2 money supply has increased, but the M-1 money supply was stable. (3) the M-1 money supply has increased, but the M-2 money supply was stable. (4) both the M-1 and M-2 money supplies were stable.

Question

Alberto Leach

Business

1 March, 17:54

Jared read an article that showed a dramatic increase in money market accounts and certificates of deposit in the last quarter. The story reported that all other major components of the U. S. money supply remained unchanged. Based on this information, Jared can conclude that for the past quarter (1) both the M-1 and the M-2 money supplies have increased. (2) the M-2 money supply has increased, but the M-1 money supply was stable. (3) the M-1 money supply has increased, but the M-2 money supply was stable. (4) both the M-1 and M-2 money supplies were stable.

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Lane Hartman · Answer 1

2) the M-2 money supply has increased, but the M-1 money supply was stable.

Explanation:

Monet market funds and certificates of deposits are included in the M2 money supply.

Since all the other major components of the money supply, both M1 and M3, remained unchanged, then only M2 has increased.

M2 includes M1 + savings accounts, certificates of deposits and money market funds.