Sarafina withdraws $450 from her saving account and places the money in her wallet. This transaction will

Question

Quizplus · Accepted Answer

Withdrawing money from a savings account and placing it in a wallet moves the money from a form that is not counted in M1 (savings accounts are part of M2 but not M1) to a form that is counted in M1 (cash). This increases M1 but does not change M2, as the total amount of money in the economy (M2) remains the same; it's just redistributed between categories.

Sarafina Withdraws $450 from Her Saving Account and Places the Money