Question

Indicate whether a debit will increase (i) or decrease (d) each of the following accounts listed in items 1 through 15.

1) Increase
2) (d) Decrease

Answer 1

M1 and M2 are two categories of money supply used by economists. M1 includes the most liquid forms of money such as currency and demand deposits, while M2 includes M1 plus additional forms of money such as savings deposits and money market funds. The items listed can be classified as M1 or M2 based on their characteristics.

Step-by-step explanation:

M1 and M2 are two categories of money supply used by economists. M1 includes the most liquid forms of money such as currency and demand deposits, while M2 includes M1 plus additional forms of money such as savings deposits and money market funds.

1. a. Your $5,000 line of credit on your Bank of America card is neither in M1 nor M2 as it is not considered as money.
2. b. $50 dollars' worth of traveler's checks you have not used yet is in M1 as it is considered as money.
3. c. $1 in quarters in your pocket is in M1 as it is considered as money.
4. d. $1200 in your checking account is in M1 and M2 as it is considered as money.
5. e. $2000 you have in a money market account is in M2 as it is considered as money.