Q.6 For each of the following transactions, what is the initial effect (increase
ID: 1114679 • Letter: Q
Question
Q.6 For each of the following transactions, what is the initial effect (increase or decrease) on M1? On M2 a. You sell a few shares of stock and put the proceeds into your savings account. b.You sell a few shares of stock and put the proceeds into your checking account. .You transfer money from your savings account to your checking account. d. You discover $0.25 under the floor mat in your car and deposit it in your checking account. e. You discover $0.25 under the floor mat in your car and deposit it in your savings account.Explanation / Answer
a) In this case M1 will not change, M2 will increase, because depositing money in savings account is part of M2.
b) Shares are not part of M1 & M2, however depositing in checking account increses M1 & M2.
c) It will not affect M2, but M1 will increase as funds are getting transferred.
d) In this case both will not change as we are transferring funds within M1.
e) In this case M1 will decrease but M2 will not change.
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