Which of the following measures of money supply is most liquid?
Show answer & explanation
Correct answer: D
Explanation
The correct answer is option 4 i.e. M1.
In the context of money supply measures, M1 includes the most liquid forms of money, which are:
- Currency notes and coins in circulation (excluding those held by the central bank and the commercial banks).
- Demand deposits with commercial banks (balances in checking accounts).
- Other deposits can be quickly converted into currency or used for transactions, such as traveler's checks.