Which of the following statements best summarizes the differencebetween the M-1 definition of the money supply and

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Question:

Which of the following statements best summarizes the differencebetween the M-1 definition of the money supply and the M-2definition?

A. The M-1 money supply consists only of currency (coins andpaper money) that circulates in our economy, while the M-2 includestravelers checks and funds in demand deposits.

B. The M-1 definition consists of "hard" currencies which arebacked by gold and silver, while M-2 consists of "soft" currencieswhich are not backed by gold and silver.

C. The M-2 definition includes everything in the M-1 definition,plus additional components such as money in savings accounts, moneymarket accounts, and certificates of deposit.

D. The M-1 definition of the money supply considers onlydomestic currencies while the M-2 definition includes foreigncurrencies.