A Reason That Economists Keep an Eye on Both M2

question 147

Multiple Choice

A reason that economists keep an eye on both M2 and M1 is because

• A) M2 is more accurate than M1.
• B) both fluctuate widely and frequently in total dollar value.
• C) money market accounts are sometimes used like checking accounts and sometimes like savings accounts.
• D) during a recession, M1 is meaningless.

---

Definitions:

GDP Deflator

An economic metric that converts output measured at current prices into constant-dollar GDP, allowing for the comparison of economic productivity over time by removing the effect of inflation.

GDP Deflator

A valuation of the price tiers for all new, domestic-origin, final goods and services within an economic setting.

Inflation Rate

How quickly the general pricing level of goods and services rises, making the purchasing power weaken.

Nominal GDP

The market value of all finished goods and services produced within a country in a year, measured in current prices without adjustment for inflation.