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Exhibit: Money in the Economy

-(Exhibit: Money in the Economy) In Year 2, if savings deposits had been $250 billion instead of $200 billion, M2 would have been
A) $575 billion.
B) larger by $50 billion.
C) smaller by $50 billion.
D) unaffected.

Question

Use the following to answer questions.
Exhibit: Money in the Economy
 
-(Exhibit: Money in the Economy) In Year 2, if savings deposits had been $250 billion instead of $200 billion, M2 would have been
A) $575 billion. 
B) larger by $50 billion. 
C) smaller by $50 billion. 
D) unaffected.

Quizplus · Accepted Answer

M2 = currency + demand deposits + time deposits + savings deposits. If savings deposits had been $250 billion instead of $200 billion in Year 2, and assuming that all other factors remain constant, then M2 would have increased by $50 billion. Therefore, the best choice is B.

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