Describe M1, M2, and M3. Which is considered as the Money Supply?

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Expert Solution

1):-M1 is defined as the narrowest money of the U.S money supply. It consists currency (coins and paper money) and all checkable deposits, traveler's check.

M2 is defined as a measure of the money supply that includes all elements of M1 as well as "near money." M1 includes cash and checking deposits, while near money refers to savings deposits, money market securities, mutual funds and other time deposits. These assets are less liquid than M1 and not as suitable as exchange mediums, but they can be quickly converted into cash or checking deposits.

M3 is defined as a measure of the money supply that includes M2 as well as large time deposits, institutional money market funds, short-term repurchase agreements and other larger liquid assets' includes assets that are less liquid than other components of the money supply.

2):-Supply of money is defined as a total value of financial assets in the economy that are considered money

overall mesure of the money supply are all (M1+

+, M2, +M3)

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Rahul Sunny answered 2 months ago

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