The M2 Definition of the Money Supply Is Based on the Concept

question 22

Multiple Choice

The M2 definition of the money supply is based on the concept that

• A) M₁ is a small number, and should be increased in size.
• B) many types of deposits can be used as both payments and stores of value.
• C) checking deposits are used for payments, and therefore, not part of M₁.
• D) cash is not used for the majority of payments.

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Definitions:

MC (Marginal Cost)

The cost incurred by producing one more unit of a product or service.

Shutdown Point

The level of production and price at which the revenue received does not cover the variable costs, making further production unprofitable.

ATC (Average Total Cost)

The total cost of production divided by the quantity produced, representing the cost per unit of output.

MC (Marginal Cost)

Expenses incurred from making one more unit of a product or service.