12) When Maria deposits $100 in currency in her checkable deposit at Bank of Ame
ID: 1116238 • Letter: 1
Question
12) When Maria deposits $100 in currency in her checkable deposit at Bank of Ameríca, the immediate effect is that the quantity of M1 B) does not change. C) increases. D) changes, bat the direction of the change depends on whether the deposit was accepted by a thrift institution or a commercial bank. E) changes only if Bank of America does not have excess reserves. 13) In December 2009, currency was $400 billion, traveler's checks were $5 billion; checkable deposits owned by individuals and businesses were $600 billion, saving deposits were $2,000 billion, time deposits were $1,500 billion; and money market funds were $1,200 billion. What was the M1 in December 2009? A) MI = $405 billion B) M1 = $1,005 billion 9 MI = $3,005 billion D) M1 = $3.500 billion E) M1 $3,505 billion 14) Which of the following are included in the M2 definition of money? A) currency outside of banks and checkable deposits B) currency outside of banks and credit lines on credit cards C) time deposits and the value of prime grade bonds D) currency both inside and outside of banks E) currency inside of banks and banks' reserves 15) If currency outside of banks is $800 billion; traveler's checks are $10 billion; checkable deposits owned by individuals and businesses are $700 billion; savings deposits are $4,000 billion; small time deposits are $1,000 billion; and money market funds and other deposits are $800 billion, then M2 billion. equals A) $7,310 B) $5,800 C) $2,510 D) $1,510 E) $710 16) A public authority that provides banking services to commercial banks and regulates financial institutions and markets is called a A) commercial bank. B) thrift institution. C) central bank. D) money market fund. E) mint.Explanation / Answer
Correct option: (b)
Explanation: Since M1 is one of the most liquid measures of money supply, it takes into account currency, checking deposits, traveller checks, demand deposits etc.
Thus, if currency is deposited in checking account, then currency falls while checking deposit increases by the same amount , thereby keeping M1 unchanged.
Note: First question is answered below
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