If Marc withdraws $100 from his chequable account and deposits $100 in his saving account, then:

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Quizplus · Accepted Answer

M1 includes forms of money that are highly liquid such as cash and checking account balances. When Marc withdraws $100 from his chequable (checking) account, M1 decreases by that amount. However, when he deposits this $100 into his savings account, it does not affect M1 since savings accounts are not part of M1. M2 includes M1 and other forms of money like savings accounts, so the $100 simply moves within M2 from one category to another without changing the total amount of M2.

If Marc Withdraws $100 from His Chequable Account and Deposits