Question

Jane currently has $5,000 in her savings account and $2,000 in her checking account at the local bank. Instructions: Use a positive number to represent an increase and a negative number to represent a decrease. a. Suppose she withdraws $400 in cash from her savings account. By what dollar amount does the country's money supply (M1 and M2) change as a result of Jane's actions

Answer 1

Change in M1 $400

Changd in M2 $0

Step-by-step explanation:

The money which is been held by individuals in savings accounts is part of the M2 money supply, but its not part ofthe M1 money supply.

Hence when Jane withdraws $400 cash from her savings account,the M1 money supply will increases by $400. However, the M2 money supply does not tend to change reason been that the M1 money supply is included as part of the M2 money

Change in M1 $400

Changd in M2 $0