The M2 measure of the money supply equals (A) M1 plus savings account balances plus smallminusdenomination time deposits. (B) savings account balances plus smallminusdenomination time deposits plus traveler's checks. (C) savings account balances plus smallminusdenomination time deposits plus noninstitutional money market fund shares. (D) M1 plus savings account balances plus small-denomination time deposits plus noninstitutional money market fund shares.

Answer: Option (D) is correct.

Explanation:

Correct Option: M1 plus savings account balances plus small-denomination time deposits plus non-institutional money market fund shares.

M1 consists of:

M1 = currency with public + demand deposits + check able deposits + other deposits with RBI

M2 consists of:

M2 = M1 + post office saving A/C + small-denomination time deposits + non-institutional money market fund shares

Therefore, the monetary aggregate, M2, includes all the elements of M1, post office savings A/C, small-denomination time deposits and non-institutional money market fund shares.

Large denomination time deposits are included in M3 because it includes amounts greater than $100000.