If a Sizeable Amount of U

question 128

Multiple Choice

If a sizeable amount of U.S. currency is held outside of the United States,

• A) the accuracy of the M2 money supply figures will be improved, but there will be no impact on M1.
• B) the accuracy of the M1 money supply figures will be improved, but there will be no impact on M2.
• C) the money supply figures, particularly those for M1, will be less reliable.
• D) the money supply figures of the U.S. will not be affected because the funds are held outside the U.S.

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Definitions:

Gold Standard

A monetary system where a country's currency or paper money has a value directly linked to gold.

Trade Deficit

A situation occurring when a country's imports exceed its exports, resulting in a negative balance of trade.

Money Supply

Currency, checking deposits, and checklike deposits (M or M1).

Exchange Rate

The value of one currency for the purpose of conversion to another currency, determining how much one currency is worth in terms of another.