Question

What components of money do we count in M2?

Short answer

M2 is a comprehensive of M1, certificate of deposits, time deposits, money market fund and savings.

Step-by-step solution

 : Concept Introduction

M1 term is usually used to explain money which includes circulation of currency and coins, accounts checking etc.

M2is a broader concept of money as compared to M1.

Formula

The components in money counted in M2 are to be determined.

M2 is a comprehensive of M1, certificate of deposits, time deposits, money market fund and savings.

So, M2 can be formulate as below;

$M2=\left[\begin{array}{l}\text{Coins and currency in circulation + demand deposit}\\ +\text{traveller's check + Savings and time deposits}\\ +\text{certificates of deposits + money market funds}\end{array}\right]$