Scenario M1 M2 Monetary base 19. Marc transfers $500 from his savings to his checking account 20. Cynthia deposits $200 cash into her savings account 21. Joffrey burns a $100 bill to impress a girl (don’t do this—it’s illegal and she won’t be impressed) 22. A bank uses $1,000 of its reserves to make a cash loan 23. A bank sells the Federal Reserve $10,000 worth of treasury bonds. The bank receives $10,000 as excess reserves in exchange for the bonds 24. A business transfers $20,000 from a money market account to their checking account 25. Maria withdraws $250 cash from her checking account out of an ATM machine
Part 3 - Practice- For each scenario, identify how the action will immediately affect M1, M2, and the monetary base. Indicate if each will increase (Inc), decrease (Dec), or not change (NC).
Scenario |
M1 |
M2 |
Monetary base |
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19. |
Marc transfers $500 from his savings to his checking account |
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20. |
Cynthia deposits $200 cash into her savings account |
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21. |
Joffrey burns a $100 bill to impress a girl (don’t do this—it’s illegal and she won’t be impressed) |
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22. |
A bank uses $1,000 of its reserves to make a cash loan |
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23. |
A bank sells the Federal Reserve $10,000 worth of treasury bonds. The bank receives $10,000 as |
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24. |
A business transfers $20,000 from a |
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25. |
Maria withdraws $250 cash from her checking account out of an ATM machine |
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