An investor's portfolio includes currency in circulation, demand deposits, Treasury bills,… — JAMB UTME

An investor's portfolio includes currency in circulation, demand deposits, Treasury bills, and fixed time deposits. Which of the following statements correctly distinguishes the components of narrow money ( $M_1$ ) from near-money assets?

Currency in circulation and demand deposits constitute narrow money ( $M_1$ ), while Treasury bills and fixed time deposits are classified as near-money.Cevap
B
Treasury bills and demand deposits constitute narrow money ( $M_1$ ), while currency in circulation and fixed time deposits represent near-money.
C
Currency in circulation and fixed time deposits constitute narrow money ( $M_1$ ), while demand deposits and Treasury bills represent near-money.
D
All four financial assets directly constitute narrow money ( $M_1$ ) because they can be converted into cash without nominal value loss.

Cevap

Currency in circulation and demand deposits constitute narrow money (

M_1

), while Treasury bills and fixed time deposits are classified as near-money.

Narrow money (

M_1

) comprises financial assets that are immediately available as a medium of exchange, specifically currency held by the public and demand deposits at commercial banks. In contrast, near-money assets (such as time deposits, savings accounts, and Treasury bills) are highly liquid stores of value that cannot be used directly to settle transactions without conversion.

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Identify the components that function directly as a medium of exchange without requiring conversion.

Currency in circulation (notes and coins) and demand deposits (checking accounts) are directly spendable.

These form narrow money (

M_1

Identify highly liquid assets that act as stores of value but cannot be spent directly for transactions.

Treasury bills and fixed time deposits require conversion or maturity before spending.

These assets are classified as quasi-money or near-money.

Compare the classifications to select the option that correctly groups

M_1

and near-money.

The statement accurately placing currency and demand deposits in

M_1

, and Treasury bills and time deposits in near-money, is correct.

This aligns with monetary economics definitions under JAMB UTME syllabus.

Anahtar Kavram

Distinction between Narrow Money (

M_1

) and Near-Money

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