Answered: K Pedro takes $200 from his money…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

K Pedro takes $200 from his money market fund and deposits the $200 in his checking account. What is the immediate change in M1 and M2?

A. M1 increases and M2 decreases by $200.

B. M1 increases by $200 and M2 does not change.

C. M1 does not change and M2 does not change.

D. M1 decreases and M2 increases by $200.

E. Both M1 and M2 decrease by $200.

Definition Definition Financial market that deals in securities or assets that are short-term in nature. The money market is responsible for keeping up the liquidity of the businesses and the organizations. These securities are usually held for a period of 12 months or less and are issued by institutions that require cash or funds for their short-term cash flow requirements. The money market is regulated by the federal government.

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