Asked by Frank sweet II on Jun 28, 2024
Verified
If Jane Doe puts $1,000 cash into her checking account,
A) M1 increases.
B) M1 stays the same.
C) M1 decreases.
M1
A category of the money supply that includes currency in circulation and checkable deposits in banks.
- Elucidate the mechanism of generating and annihilating money in the banking infrastructure.
Verified Answer
MP
Manikandan PattaliJun 30, 2024
Final Answer :
B
Explanation :
M1 stays the same because the transfer of cash into a checking account does not change the total amount of currency and demand deposits in the economy; it merely shifts money from one form of M1 (currency) to another form of M1 (demand deposits).
Learning Objectives
- Elucidate the mechanism of generating and annihilating money in the banking infrastructure.