Assume that M1 is currently $2,700 and M2 is $11,000. Determine the new levels f

Question

Assume that M1 is currently $2,700 and M2 is $11,000. Determine the new levels for M1 and M2 and whether the new values represent an increase decrease or unchanged totals for M1 and M2 based on each of the following INDEPENDENT scenario: In other words, each scenarios should be based on the given values for M1 and M2. not your computed values a) S. Aver withdrew $300 from her checking account and deposits the full amount to her saving account. b) A. S. Pender used the ATM to withdraw $100 in preparation for 'Black Friday' shopping. c) B. Orower withdrew $500 from his checking account and used it to repay his loan with Bank on US. d) B. Ond used $600 from his checking account and used the money to purchase US Treasury bills. .e) C Ustomer's Certificate of Deposit for $900 was closed and deposited into her checking account.

Explanation / Answer

M1 = Currency held by general public + demand deposits

M2 = M1 + Saving or time deposits

a) M1 = 2700-300 = 2400

M2 = 11000+300 = 11300

b) No eefect on M1 or m2as it is shifted from demand deposits ot currency held by general public.

M1 = 2700-100+100 =2700

c) M1 = 2700-500 = 2200

M2 = 11000+500 = 11500

d) M1 = 2700-600 = 2100

M2 = 11000+600 = 11600

e) M1 = 2700+900 = 3600

M2 = 11000-900 = 12100

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