Which of the following statements is true? a) A savings deposit is not counted in the most basic or narrow

Which of the following statements is true?

a) A savings deposit is not counted in the most basic or narrow definition of the money supply.

b) M1 is sometimes referred to as transactions money.

c) Money reduces the transaction costs of making exchanges.

d) b and c.

e) a, b, and c.

Answer: e) a, b, and c.

It is accurate to state all the following about money and the money supply a) Money supply increases with the growth of available money b) Money is more than the total of money in circulation c) Money includes more than money in circulation.

a) In the case of the money supply that is defined in the strict sense – exclusively by M1, savings deposits are not considered as they are not as liquid and are not easily retrievable for use in making payments.

b) M1 among the total money supply refers to currency in circulation and demand deposit, thus it is called transaction or active balance as people use these money forms for the purchases of goods and services.

c) Money the whole cuts the cost inherent in facilitating the trade by providing a means of exchange that eradicates the complications experienced in the barter system.

Altogether, these statements provide an explanation of what money is, with close reference to the more specific money measures like M1 that refer to actual transaction media, as well as what money does, primarily in the function of alleviating the costs of transactions and facilitating economic exchanges.