Suppose you transfer $500 from your checking account to your savings account. With this transaction, M1 _____ and M2_____.

Question

Quizplus · Accepted Answer

Transferring money from a checking account to a savings account does not change the total amount of money in the economy; it merely reallocates it between different forms of money. M1 decreases because it includes checking accounts but not savings accounts, while M2, which includes both, remains unchanged.

Suppose You Transfer $500 from Your Checking Account to Your