Understanding Money and Its Functions

What does M1 measure in terms of money supply?

• Currency held by the public

• Chequable demand deposits

• Other deposits

• All of the above

What is the broader concept of money supply compared to M1?

• M2

• M3

• M4

• None of the above

What is the formula for M3?

• M3 = M1 + savings accounts + government bonds + cash equivalents
• M3 = M2 + foreign currency + real estate investments + stocks
• M3 = M2 + large time deposits + institutional money market funds + other liquid assets
• M3 = M2 + personal loans + credit card debt + auto loans

What is the difference between Narrow Money and Broad Money?

• Narrow Money is liquid forms of money (cash, demand deposits), while Broad Money includes all of Narrow Money plus less liquid assets (savings accounts, time deposits).
• Narrow Money is less liquid than Broad Money, which is only cash.
• Broad Money is only cash and demand deposits, while Narrow Money includes savings accounts.
• Narrow Money includes all forms of money, while Broad Money is only cash.

Which of the following is included in the M2 money supply?

• Only currency in circulation

• All M1 components plus savings accounts

• Only time deposits

• None of the above

What is the primary difference between M2 and M3?

• M3 includes large time deposits

• M2 includes foreign currency

• There is no difference

• M2 is broader than M3

How does the central bank influence the money supply?

• By changing interest rates

• By regulating the stock market

• By controlling inflation rates

• By managing government spending

Which of the following is a component of M3?

• Currency in circulation

• Demand deposits

• Large time deposits

• All of the above

What is the definition of M4 in relation to money supply?

• It includes all of M3 plus other liquid assets

• It is the same as M3

• It only includes cash

• It is a measure of foreign currency

Which of the following best describes the function of M1 in the economy?

• It represents the total money supply including all forms of money

• It includes only the most liquid forms of money

• It is a measure of savings and investments

• It is used to calculate inflation rates