Donovan's $200,000 CD matures. He deposits $20,000 into his checking account, buys a CD for $150,000,...
Donovan's $200,000 CD matures. He deposits $20,000 into his checking account, buys a CD for $150,000, and puts $30,000 into his money-market mutual fund. How does this affect M1 and M2?
Please show step by step on how to solve.
Homework Answers
The 200,000 certificate of deposit falls under M2. So it's maturity and following actions have the below effects
M1 increases by 200000. M2 remains unchanged.
The $20000 into checking account And buying of CD of 150000 and 30000 in mutual fund implies a decrease in M1 by 180000 and M2 remains unchanged.
So
M1 20000
M2 200000
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Donovan's $200,000 CD matures. He deposits $20,000 into his
checking account, buys a CD for $150,000,...
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