Final answer:
Freema's action of moving $1,000 from a checking account to a time-deposit does not change the money supply because it remains within the banking system and does not affect the bank's reserves or lending capacity.
Step-by-step explanation:
If Freema withdraws $1,000 from her checking account to purchase a $1,000 time-deposit, the money supply remains unchanged. This is because the definition of M1 money supply includes checkable (demand) deposits which are used as a medium of exchange. When Freema transfers her money from a checking account to a time-deposit, the form of the money goes from one type of bank account to another, but it's all within the banking system and it doesn't affect the total money supply. Furthermore, banks must hold enough money in reserves to meet their liabilities, so when they engage in activities like buying bonds or altering loan balances as per reserve requirements, it could affect the money supply. However, in Freema's case, simply moving her funds from checking to a time deposit doesn't alter the reserves or the overall lending capacity of the bank. Hence, the money supply remains unchanged.