Which of the following is included in M2?

M2 is a measure of the money supply that includes a broader set of financial assets than M1. To understand why option B is the correct answer, it's important to clarify what M1 and M2 encompass.

M1 represents the most liquid forms of money, which includes physical currency (coins and paper money) as well as demand deposits (checking accounts). M2 builds upon this by adding savings accounts, money market accounts, and small time deposits—essentially, all the components of M1 plus additional forms of savings that are not as readily accessible but can still be converted into cash relatively easily.

The inclusion of savings and money market mutual funds in M2 reflects the broader availability of cash-like assets that are slightly less liquid than those in M1 but still quickly convertible to cash for transaction purposes. This distinction is what sets M2 apart from M1 and demonstrates a wider array of money available in the economy.

Other options, such as only including coins and paper money or all forms of currency, fail to recognize this broader definition that M2 covers, while including M3 plus small time deposits inaccurately presents the classifications of money supply since M3 is typically a broader category that exceeds M2. Therefore, understanding these classifications highlights why M2