CFA Practice Question

There are 341 practice questions for this study session.

CFA Practice Question

If people transfer money from their checking accounts to their savings accounts, ______

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.
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