What additional components does M3 include compared to M1 and M2?

M3 is a broader measure of the money supply compared to M1 and M2, encompassing various types of financial assets. The correct answer highlights that M3 includes long-term repurchase agreements and large-denomination time deposits. These components expand the definition of money supply to include more liquid and higher-value assets that are not counted within M1 or M2.

M1 primarily consists of the most liquid forms of money, such as currency in circulation and demand deposits. M2 builds on M1 by including savings accounts and other near-money assets, allowing for a larger but still relatively accessible measure. However, M3 extends this by including financial instruments that are typically less liquid but are still relevant in assessing the total money supply in the economy. Long-term repurchase agreements are financial contracts used by institutions to acquire funds, while large-denomination time deposits refer to fixed deposits held at banks that exceed a certain minimum balance.

In summary, the inclusion of these additional components in M3 provides a more comprehensive view of the total money available in an economy, taking into account assets that might have a longer time frame for liquidity compared to what is typically found in M1 and M2.