Read the two statements and choose the correct option.
I. A rise in the public's preference for holding cash rather than deposits leaves M1 unchanged at first.
II. Interbank deposits are part of the money supply.

Only ICorrect answerYour answerOnly IICorrect answerYour answerBoth I and IICorrect answerYour answerNeither I nor IICorrect answerYour answer

Show the answer and explanation

CorrectNot quiteAnswer A

Correct answer: A

Moving deposits into cash changes the mix of M1, not its total, at first. I is true.
Deposits that banks hold with each other are not held by the public, so they are left out. II is false.

Ten questions from Money and Its Functions, at your own pace.

Ten questions from Money and Its Functions, at your own pace.

Read the two statements and choose the correct option.I. A rise in the public's preference for holding cash rather than deposits leaves M1 unchanged at first.II. Interbank deposits are part of the money supply.