Question

Susan just sold her text books for $200 cash and deposited the cash she received in her checking account. This transaction has

A) increased the quantity of M1.

B) decreased the quantity of M1.

C) increased the quantity of M2.

D) decreased the quantity of M2.

E) not changed either M1 or M2.

Answer 1

Answer:

E) not changed either M1 or M2.

Explanation:

M1 includes bills and coins in circulation, checking accounts, travelers' checks and other checkable deposits.

M2 includes M1 + savings accounts, certificates of deposits and money market funds.

Since Susan received $200 in cash (included in M1) and deposited the money in her checking account (also included in M1), neither M1 nor M2 is modified.