If an individual moves money from a chequing account to a money market mutual fund, ________.
A) M1+ decreases and M2+ increases
B) M1+ stays the same and M2+ increases
C) M1+ decreases and M2+ stays the same
D) M1+ increases and M2+ decreases

Question

Quizplus · Accepted Answer

M1 includes forms of money that are very liquid, such as cash and checking account balances. Moving money from a chequing account (part of M1) to a money market mutual fund (part of M2 but not M1) decreases M1. However, since M2 includes all of M1 plus savings accounts, money market accounts, and other types of accounts, the total amount of M2 remains the same.

If an Individual Moves Money from a Chequing Account to a Money