All else being equal, how would each of the following affect the demand for M1 a

Question

All else being equal, how would each of the following affect the demand for M1 and the demand for M2? The maximum number of checks per month that can be written on MMMF and MMDA is raised from three to thirty. The stock market crashes, and further sharp declines in the market are widely feared. Banks introduce oevrdraft protection, under which funds are automatically transfered from savings to checkings as needed to cover checks. A crackdown reduces the illegal drug trade, which is carried out largely in curercy.

Explanation / Answer

M1:A measure of the money supply that includes all physical money, such as coins and currency, as well as demand deposits, checking accounts and Negotiable Order of Withdrawal (NOW) accounts. M1 measures the most liquid components of the money supply, as it contains cash and assets that can quickly be converted to currency
M2:A measure of money supply that includes cash and checking deposits (M1) as well as near money.

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.