- CFA Exams
- CFA Level I Exam
- Topic 2. Economics
- Learning Module 12. Monetary and Fiscal Policy
- Subject 1. What is Money?
CFA Practice Question
If people transfer money from their checking accounts to their savings accounts, ______
B. M1 falls and M2 remains constant.
C. M1 rises and M2 falls.
A. M1 falls and M2 rises.
B. M1 falls and M2 remains constant.
C. M1 rises and M2 falls.
Correct Answer: B
M2 contains the components of M1 plus savings accounts and money market funds. Thus, if you transfer money out of M1 to M2, M2 does not change because it already accounted for the money.
User Contributed Comments 7
User | Comment |
---|---|
danlan | Good to understand that M2 contains M1 and M3 contains M2. |
sarath | checking account - M1 , savings account, short term savings etc. - M2. |
Rotigga | Good question. |
ryanweng88 | M2 = M1 + Saving + Small Time Deposits + Retail Money Fund |
jpducros | danlan, can you say more about M3 ....never seen anywhere...or is it humour ? |
poomie83 | M3 is not part of the course. |
johntan1979 | M3 = M2 + large & long term deposits Since 2006, M3 is no longer tracked by the US Federal Reserve, which explains why it is no longer part of the CFA curriculum. |