Question

In most economies, which one is true:

M1 is the same as MB

M1 is less than MB

M1 is greater than MB

M1 has no correlation to MB

Answer 1

Option C.

• In most economies, M1 is greater than MB.
• The monetary base or M0 contains the currency in circulation in the banks or with the public. It also includes the currencies held in the vaults.
• while M1 contains currency in circulation and also demand deposits and checkable deposits thought it does not contain currency in vaults.
• M1 is considered to be greater than MB as it includes MB with other checkable and demand deposits.