- CFA Exams
- CFA Level I Exam
- Topic 2. Economics
- Learning Module 12. Monetary and Fiscal Policy
- Subject 6. Contractionary and Expansionary Monetary Policies and the Neutral Rate
CFA Practice Question
Mutual funds that allow deposits and withdrawals with minimal transactions fees ______
B. serve as a medium of exchange and should not be counted as part of the M-2 measure of the money supply.
C. offer great liquidity so that owners of the mutual funds have quick and cheap access to additional purchasing power.
A. serve as a medium of exchange and should be counted as part of the M-1 measure of the money supply.
B. serve as a medium of exchange and should not be counted as part of the M-2 measure of the money supply.
C. offer great liquidity so that owners of the mutual funds have quick and cheap access to additional purchasing power.
Correct Answer: C
Low-cost mutual funds are an asset that provides a high degree of liquidity and quick and cheap access to purchasing power that augments the money supply. This indicates the limitations of monetary policy, as central banks have no control over this.
User Contributed Comments 7
| User | Comment |
|---|---|
| cbb1 | Mutual funds are not part of M-1, M-2 or M-3 and are not a medium of exchange. |
| bobert | Money market mutual funds are included in M2. |
| magicchip | bobert is right. M2 includes MM funds. |
| DannyZhou | The last one is a better choice since the question didn't specify it is a money market mutual fund. |
| gill15 | What does this question have to do with this section? |
| gill15 | never mind |
| Inaganti6 | Try telling the Apple store guy you'll give him your mutual fund in exchange for the new macbook , all while you point to your fund on your smartphone trading app! |