If Veronica withdraws $1,500 from her savings account and deposits it in her checking account, then M1 will ________ and M2 will ________.
A) increase; decrease
B) increase; not change
C) not change; decrease
D) not change; not change

Question

Quizplus · Accepted Answer

M1 includes forms of money that are readily accessible for transactions, such as cash and checking account balances. Moving money from a savings account (which is part of M2 but not M1) to a checking account increases M1. M2 includes all of M1 plus savings accounts, so the total amount of money in M2 does not change with such a transfer.

If Veronica Withdraws $1,500 from Her Savings Account and Deposits