# Critical Analysis Q15---### Instructions:Indicate how each event in the following table would affect M1 and M2.---| Event | Effect on M1 | Effect on M2 ||---------------------------------------------------------------------------------------------------------|--------------|--------------|| A shift of funds from money market mutual funds into stock and bond mutual funds because fees required to invest in the latter have declined | | || A shift of funds from interest-earning checking deposits to money market mutual funds | | |---### Explanation:- **M1** and **M2** are categories of the money supply that measure different types of monetary assets. - The table presents two events, asking to determine their effects on both M1 and M2. - **M1** generally includes physical currency and coin, demand deposits, traveler's checks, and other checkable deposits. - **M2** includes all of M1 along with savings deposits, small-denomination time deposits, and shares in retail money market mutual funds.The dropdowns in the table suggest selecting an effect from predefined options for each event's impact on M1 and M2.

The M2 stock of money will decrease but there will be no change in the M1 stock of money. Since, the…

Indicate how each event in the following table would affect M1 and M2. Event Effect on M1 Effect on M2 A shift of funds from money market mutual funds into stock and bond mutual funds because fees required to invest in the latter have declined A shift of funds from interest-earning checking deposits to money market mutual funds

Indicate how each event in the following table would affect M1 and M2. Event Effect on M1 Effect on M2 A shift of funds from money market mutual funds into stock and bond mutual funds because fees required to invest in the latter have declined A shift of funds from interest-earning checking deposits to money market mutual funds

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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