Suppose you withdraw $1,000 from your savings account and put it in your checking account. Briefly explain how this will affect M1 and M2
What will be an ideal response?
M2 will not change and M1 will rise by $1,000. Going from a savings account to checking account would raise M1, but both are part of M2, so M2 would not change.
You might also like to view...
Which of the following did NOT contribute to "internal economies" in the industrialization process?
(a) Diminishing returns to scale (b) Central power sources (c) Managerial improvements (d) Transportation networks
Under which of the following market conditions is it most difficult to maintain a cartel agreement?
a. There are many firms in the industry and these firms have similar costs. b. There are many firms in the industry and these firms have different costs. c. There are few firms in the industry and these firms have similar costs. d. There are few firms in the industry and these firms have different costs. e. There are many firms in the industry and these firms produce homogeneous products.