When Maria deposits $100 in currency in her checkable deposit at Bank of America, the immediate effect is that the quantity of M1
A)changes, but the direction of the change depends on whether the deposit was accepted by a thrift institution or a commercial bank.
B)increases.
C)decreases.
D)changes only if Bank of America does not have excess reserves.
E)does not change.

Question

Quizplus · Accepted Answer

Depositing currency into a checkable deposit does not change the overall quantity of M1, as both currency and checkable deposits are components of M1. The form of money changes, but the total amount remains the same.

When Maria Deposits $100 in Currency in Her Checkable Deposit