Suppose you transfer $500 from your savings account to your checking account. With this transaction, M1 _____ and M2 _____. decreases; decreases increases; stays the same increases; decreases stays the same; decreases
The M1 decreasesand M2 stays the same as one transfer $500 from your savings account to your checking account.
What is M1 & M2?
The M1 means the most liquid money that comprised of the currency, traveler’s check, and checking account deposits.
The M2 is broader measure of Ms although it is has a less liquid measure compared to M1 and consists of currency, traveler’s checks, checking deposits, savings accounts, money market mutual funds etc
