Suppose your bank lowers its minimum balance requirement to get free checking by $500. So you...
Suppose your bank lowers its minimum balance requirement to get free checking by $500. So you take $500 out of your checking account and put it into your savings account. What is the overall effect on M1 and M2?
M1 falls by $500, M2 rises by $500.
M1 falls by $500, M2 is unchanged.
M1 is unchanged, M2 is unchanged.
M1 is unchanged, M2 rises by $500.
Homework Answers
Answer:
The correct answer is C - M1 falls by $500, M2 is
unchanged.
M2 includes elements of M1 also, so when you take money out of your
checking account & out it into a money market deposit account,
M1 falls by$500 & M2 is unchanged.
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