Why are the following included in the broader definition of supply known as M2? (a) money market deposit accounts (b) money market mutual funds (c) savings accounts
(a) Money market deposit accounts: They allow their owners to write only a few checks per month but pay market-determined interest rates.
(b) Money market mutual funds: Owners of shares in money market mutual funds can withdraw their funds by writing checks. Thus, depositors can use their holdings of fund shares just like checking accounts.
(c) Savings accounts: Modern banking procedures have blurred the distinction between checking balances and savings balances. For example, most banks these days offer convenient electronic transfers of funds from one account to another, either by telephone or by pushing a button on an automated teller. Consequently, savings balances can become checkable almost instantly. For this reason, savings accounts are included?along with money market deposit accounts and money market mutual fund shares?in the broader definition of the money supply known as M2.
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