Which component of M2 is characterized as less liquid than what is covered in M1?

Which component of M2 is characterized as less liquid than what is covered in M1?

• A. Savings accounts
• B. Checking accounts
• C. Physical currency
• D. Traveler's checks

Answer: (A)

The component of M2 that is characterized as less liquid than what is covered in M1 is savings accounts. M1 includes the most liquid assets, such as checking accounts, physical currency, and traveler's checks, which can be easily accessed for transactions. In contrast, savings accounts, while still accessible, have certain limitations on withdrawals and are intended for saving rather than quick spending. This makes them less liquid compared to the components of M1, as it is more difficult and time-consuming to access those funds compared to cash or funds in checking accounts, which can be used immediately without any restrictions.

The component of M2 that is characterized as less liquid than what is covered in M1 is savings accounts. M1 includes the most liquid assets, such as checking accounts, physical currency, and traveler's checks, which can be easily accessed for transactions. In contrast, savings accounts, while still accessible, have certain limitations on withdrawals and are intended for saving rather than quick spending. This makes them less liquid compared to the components of M1, as it is more difficult and time-consuming to access those funds compared to cash or funds in checking accounts, which can be used immediately without any restrictions.