Yolanda took $5,000 from her checking account and put the money in her savings account at the same bank. Based on that information, which of these is true?
A) Both M1 and M2 were reduced by $5,000.
B) M1 went down by $5,000, but M2 was unchanged.
C) Neither M1 nor M2 changed because the transfer was done at the same bank.
D) M1 and M2 both rose by $5,000.

Question

Quizplus · Accepted Answer

M1 includes cash and checking deposits, so moving money from a checking account (part of M1) to a savings account (not part of M1) reduces M1. M2 includes M1 plus savings accounts, so M2 remains unchanged.

Yolanda Took $5,000 from Her Checking Account and Put the Money