Aaron takes $100 out of his checking account and puts it in his savings account while Biff withdraws $200 from his money-market mutual fund in the form of cash.The total effect is that M1 ____and M2 ____.

Question

Quizplus · Accepted Answer

M1 increases by $100 because cash is part of M1, and Aaron's transfer does not affect M1. M2 remains unchanged because the transfer between accounts does not affect the total money supply, and Biff's withdrawal from a money-market mutual fund does not affect M2.

Aaron Takes $100 Out of His Checking Account and Puts