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Question
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Posted 7 months ago
Which of the following are included in the monetary base (MB), but NOT in the money supply (M1)?
Choose 1 answer:
(A) Credit cards
(B) Money market mutual fund accounts
(c) Currency in bank vaults on reserve
(D) Savings accounts
(E) Checking accounts
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Answer from Sia
Posted 7 months ago
Solution by Steps
step 1
Understand the definition of the monetary base (MB) and the money supply (M1). The monetary base includes currency in circulation and reserves held by banks at the central bank. M1 includes currency in circulation among the public and demand deposits like checking accounts
step 2
Identify which of the given options are part of the monetary base but not part of M1. Credit cards are a form of credit and not part of MB or M1. Money market mutual fund accounts are part of M2, not M1. Savings accounts are part of M2, not M1. Checking accounts are part of M1. Currency in bank vaults on reserve is part of the MB but not in circulation and therefore not part of M1
∻Answer∻
The correct answer is the one that is included in the monetary base but not in the money supply M1
C
Key Concept
Distinction between MB and M1
Explanation
Currency in bank vaults on reserve is part of the monetary base but not part of the money supply M1, as it is not in circulation among the public.
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