4.5 Part 1

What is included in M1 Money?

• Cash, stocks, and bonds

• Cash, traveler's checks, and checkable bank deposits

• Houses, cars, and cash

• Traveler's checks, real estate, and checkable bank deposits

Why are assets like cars, houses, stocks, and bonds not considered money?

• They are not valuable enough.

• They have very low liquidity.

• They cannot be used for transactions.

• They are not regulated by the central bank.

What happens to the quantity of money demanded when the interest rate falls?

• It decreases because the opportunity cost of holding money increases.

• It increases because the opportunity cost of holding money decreases.

• It remains unchanged as interest rates do not affect money demand.

• It shifts the demand curve to the left.

Who controls the money supply in the United States?

• The Treasury Department

• Commercial banks

• The Federal Reserve

• The President