Question

If a person withdraws $500 from his/her checking account and holds it as currency, then M1 will ________ and M2 will ________. Group of answer choices

Answer 1

When a person withdraws $500 from his checking account and holds it as currency, M1 will increase and M2 will not change.

What is a checking account?

It should be noted that a checking account simply means a deposit account that allows one to make withdrawals and deposit.

In this case, when a person withdraws $500 from his checking account and holds it as currency, M1 will increase and M2 will not change.

Here, M1 is the money supply which is composed of currency, demand deposit and savings deposit. M2 is the measure of money supply that has to do with cash, checking deposit and near money.

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