If an individual moves money from a demand deposit account to a money market deposit account
A)M1 decreases and M2 stays the same.
B)M1 stays the same and M2 increases.
C)M1 stays the same and M2 stays the same.
D)M1 increases and M2 decreases.

Question

Quizplus · Accepted Answer

Moving money from a demand deposit account (which is part of M1) to a money market deposit account (which is part of both M1 and M2) decreases M1 because the funds are no longer in a form directly used for transactions. However, M2 remains the same because both types of accounts are included in M2.

If an Individual Moves Money from a Demand Deposit Account