Question

If Jane Brown closes her account at the First National Bank and uses the money instead to open a money market mutual fund​ account, what happens to​ M1? Why?

Answer 1

Answer: M1 doesn't change.

Explanation:

M1 consists of:

M1 = Currency with the public + Checking account + other deposits with the RBI

Money market mutual fund account is a component of monetary aggregates (M1). Therefore, M1 does not change because the funds that are going towards money market mutual funds are firstly deposited in the mutual funds bank account.