Question

If an individual moves money from a savings deposit account to a money market deposit account,

a. M1 stays the same and M2 stays the same
b. M1 stays the same and M2 increases
c. M1 increases and M2 decreases
d. M1 decreases and M2 stays the same

Answer 1

The answer is: A) M1 stays the same and M2 stays the same

Step-by-step explanation:

Total money supply is divided into:

1. M1 includes all coins and bills in circulation plus traveler's checks and checking account deposits.
2. M2 includes M1 plus savings accounts, short term deposits and money market accounts.
3. M3 includes M2 plus long term bank deposits and institutional money market funds.