John and Jane decide to go on a vacation. As a result, they withdraw $2,500 from their savings account. As a result of this transfer by itself
A)M1 increases by $2,500 and M2 decreases by $2,500.
B)M1 increases by $2,500 and M2 stays the same.
C)M1 decreases by $2,500 and M2 stays the same.
D)M1 decreases by $2,500 and M2 decreases by $2,500.

Question

Quizplus · Accepted Answer

Withdrawing cash from a savings account increases M1 (currency in circulation) but does not change M2, as M2 includes both M1 and savings accounts.

John and Jane Decide to Go on a Vacation