Which measure of the money supply includes all coins and paper bills in circulation?

Which measure of the money supply includes all coins and paper bills in circulation?

• A. M1
• B. M2
• C. M3
• D. MZM

Answer: (A)

The measure of the money supply that includes all coins and paper bills in circulation is M1. M1 encompasses the most liquid forms of money available in an economy, allowing people to use it for daily transactions. This includes not only physical currency—such as coins and paper bills—but also demand deposits, which are funds held in checking accounts that can be quickly accessed. M2 and M3 include broader aggregates of the money supply. M2 expands upon M1 by including savings accounts and time deposits, while M3 further includes larger liquid assets, though it is no longer published by the Federal Reserve. MZM stands for "Money Zero Maturity," which includes all liquid money but excludes time deposits. Thus, M1 specifically focuses on currency and immediate accessibility, making it the correct measure in this context.

The measure of the money supply that includes all coins and paper bills in circulation is M1. M1 encompasses the most liquid forms of money available in an economy, allowing people to use it for daily transactions. This includes not only physical currency—such as coins and paper bills—but also demand deposits, which are funds held in checking accounts that can be quickly accessed.

M2 and M3 include broader aggregates of the money supply. M2 expands upon M1 by including savings accounts and time deposits, while M3 further includes larger liquid assets, though it is no longer published by the Federal Reserve. MZM stands for "Money Zero Maturity," which includes all liquid money but excludes time deposits. Thus, M1 specifically focuses on currency and immediate accessibility, making it the correct measure in this context.