Suppose Oscar withdraws $100 from his checking account and deposits it into his savings account.This transaction causes M1 to

Question

Quizplus · Accepted Answer

When Oscar withdraws $100 from his checking account, the M1 money supply decreases by $100 since M1 only includes physical currency and demand deposits (checking accounts). However, when he deposits the $100 into his savings account, M2 increases by $100 since M2 includes M1 and other types of deposits, including savings deposits. Overall, M1 and M2 have no net change.

Suppose Oscar Withdraws $100 from His Checking Account and Deposits