Future Business Leader Achievments (FBLA) Economics Practice Exam

Which of the following accurately describes the MI money supply?

1. Consists of saving deposits, certificates of deposit, and money market mutual funds.

2. Consists of all near monies.

3. Consists of currency, traveler's checks, demand deposits, and other checkable deposits.

4. Consists of demand deposits and money market mutual funds.

The correct answer is: Consists of currency, traveler's checks, demand deposits, and other checkable deposits.

The MI money supply accurately refers to the total of currency, traveler's checks, demand deposits, and other checkable deposits. This definition encompasses the most liquid forms of money available in the economy, commonly used for everyday transactions. Currency refers to physical cash in circulation, while traveler's checks are a safe option for carrying money. Demand deposits and other checkable deposits are accounts where funds can be quickly accessed through checks or debit cards, making them readily usable for purchases or withdrawals without any delay. Together, these components define the MI money supply, focusing on the aspects of money that can be readily utilized for spending and transactions, which is crucial for understanding the liquidity and availability of money in the economy. Understanding this classification helps clarify how various forms of money contribute to economic activity and the overall money supply.