In Defining Money as M1, Economists Exclude Time Deposits Because

question 170

Multiple Choice

In defining money as M1, economists exclude time deposits because

• A) they have no intrinsic value.
• B) they do not directly serve as a medium of exchange.
• C) they are not recognized as legal tender.
• D) they earn an interest for their holders.

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Definitions:

Crowding out

A situation where increased public sector spending reduces or eliminates private sector spending or borrowing due to higher interest rates.

Government Spending

The total amount of public sector expenditure on goods and services, including investments and transfers, which influences economic activity.

Interest Rates

The cost of borrowing money or the reward for saving, expressed as a percentage of the money borrowed or saved. It influences consumer spending, inflation, and overall economic activity.

Government Purchases

Expenditures by the government on goods and services that are included in the calculation of the country's GDP.