Policymakers May Be Uncertain About the Structure of the Economy

question 2

Multiple Choice

Policymakers may be uncertain about the structure of the economy because

• A)initial releases of data may be less accurate than later data releases.
• B)they don't know the predominant source of shocks to the economy.
• C)they don't know how shocks affect people's expectations.
• D)they are not aware of modern macroeconomic modeling techniques.

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Definitions:

M1

The narrow measure of the money supply, consisting of currency and coins held by the nonbanking public, checkable deposits, and traveler’s checks.

M1

M1 is a category of the money supply that includes all physical money like coins and currency, as well as demand deposits and other liquid assets held by the central bank.

M2

A measure of the money supply that includes all elements of M1 (such as cash and checking deposits) plus "near money" like savings deposits, money market securities, and other time deposits, which are less liquid and not as easily converted to physical cash.

Depositors

Individuals or entities that place their money in a bank for safekeeping and earn interest over time.