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Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364

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BuyFindarrow_forward

Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364
Textbook Problem

If you are out shopping for clothes and books, what is easiest and most convenient for you to spend: M1 or M2? Explain your answer.

To determine

The most convenient mode to pay for the spending on clothes and books is to be determined.

Explanation

M1 money supply includes the currency in circulation that is coins, notes savings and checkable deposits. It can be easily converted into the liquid money. It is also known as narrow money. M1 includes the money which is mainly used for circulating in the economy not for the bank’s vault.

The checkable deposits are also known as demand deposits. Earlier, the traveller checks are also considered as the part of M1 but no, the use has been decreased...

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