If the euro replaces the U.S.dollar as the world's most popular currency,that will likely ________.
A)reduce M1,without affecting M2
B)reduce M2,without affecting M1
C)cause a temporary increase in M1
D)affect neither M1 nor M2
E)none of the above

Question

Quizplus · Accepted Answer

The popularity of a currency has no direct impact on the money supply or the monetary aggregates M1 and M2. Therefore, neither M1 nor M2 would be affected by the euro replacing the U.S. dollar as the world's most popular currency.

If the Euro Replaces the U