What does M2 include in addition to M1?

M2 is a broader measure of the money supply that includes everything in M1 plus additional types of financial assets. M1 consists primarily of the most liquid forms of money, including cash, checking accounts, and other similar instruments.

In contrast, M2 encompasses M1 along with less liquid assets such as savings accounts, time deposits (like certificates of deposit), and certain other near-money assets. The inclusion of these additional components reflects a more comprehensive view of the money available in the economy for spending and investment, as they can be converted into cash or checking deposits relatively easily.

Understanding this distinction is crucial for evaluating monetary policy and its effects on the economy since it captures a broader range of money that people have at their disposal for immediate and near-future consumption. The other options listed do not fit within the definitions of M2 in the context of monetary aggregates as they represent other forms of investment or assets that do not directly contribute to the money supply in the same manner.