Author Question: If U.S. official reserves increase, is the official settlements account balance positive, negative, ... (Read 164 times)

xroflmao · **on:** Jun 29, 2018

If U.S. official reserves increase, is the official settlements account balance positive, negative, or unaffected?

What will be an ideal response?

Question 2

What assets are included in M1? In M2? Is all of M1 and M2 money? If some assets of M1 or M2 are not money, why are they included in M1 or M2?

What will be an ideal response?

Beatricemm · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

If U.S. official reserves increase, the official settlements account balance is negative.

Answer to Question 2

M1 is the sum of currency held by individuals and businesses plus checkable deposits owned by individuals and businesses plus traveler's checks. All the assets in M1 are accepted as means of payment and so all the assets are money. M2 includes all of M1 plus savings deposits, small time deposits, and money market funds. Some components of M2, such as time deposits, are not money because they are not a means of payment. But they are easily convertible into money, which is why they are included in M2.