Question 3 1 pts David deposits $500 in currency to his checking account and the

Question

Question 3 1 pts David deposits $500 in currency to his checking account and then transfers this $500 from his checking account to his saving account at a bank. What will happen to the amount of money supply after David completes the deposit and transfer? O A subtraction of $500 from the money supply because the $500 in currency is no longer in circulation O An addition of $500 to the money supply because of the creation of a saving deposit of $500 O An addition of $1,000 to the money supply because the bank holds $500 in currency and the saving account has been increased by $500 O No change in the money supply because the $500 in currency has been converted to a $500 increase in saving account.

Explanation / Answer

ANSWER:

THE CORRECT OPTION IS D BECAUSE DAVID HAS TRANSFERED $500 FROM HIS CHECKING ACCOUNT TO THE SAVING ACCOUNT AS THE MONEY HAS MOVED FROM 1 SET OF ACCOUNT OF ANOTHER AND THERE HAS NEITHER BEEN ANY INCREASE OR DECREASE IN THE MONEY SUPPLY.

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