Impact of transferring $1,000 from checking account to savings account on M1 and M2.

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Answer 1

Question

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.

Chapter P5, Problem 1KC

To determine

Impact of transferring $1,000 from checking account to savings account on M1 and M2.

Expert Solution & Answer

Answer to Problem 1KC

Option 'd' is correct.

Explanation of Solution

The money supply in the economy is calculated on the basis of various heads used to calculate the supply of money. The method that includes only cash in hand and the checkable deposits in the economy to measure the money supply is known as the M1 money supply. The measure of M2 money supply is more broader than the M1 as it includes all the components of the M1 as well as the components of the near money. The near money includes the savings deposits, money market securities, mutual funds as well as the time deposits in the economy.

Option (d):

The M1 measure of money supply is calculated by summating the cash in hand and the checking accounts. Hence, when the transfer of $1,000 from the checking account to savings account takes place, it reduces the M1 money supply by $1,000 because the savings account is not included in the M1 measure. The M2 remains unchanged because the decrease in checking account is equally credited in the savings account and there is no total change in the amount of M2. This means that the option 'd' is correct.

Option (a):

The M2 remains unchanged because the decrease in checking account is equally credited in the savings account and there is no total change in the amount of M2, but since the M1 only includes the cash in hand and the checking account, the reduction in checking account decreases the M1. This makes option 'a' incorrect.

Option (b):

Since the only two components of the M1 money supply are the cash in hand and the checking account, the reduction of $1,000 from the checking account will reduce the M1 by $1,000. But since the checking account and the savings account are the components of the M2 money supply, the decrease in checking account will equally increase the savings account that keeps the total sum unchanged and thus the M2 remains unchanged. This means that the option 'b' is incorrect.

Option (c):

Since the only two components of the M1 money supply are the cash in hand and the checking account, the reduction of $1,000 from the checking account will reduce the M1 by $1,000. The M2 remains unchanged because the decrease in checking account is equally credited in the savings account and there is no total change in the amount of M2. This means that the option 'c' is also incorrect.

Economics Concept Introduction

M1 money supply: The M1 money supply is the calculation of money supply that includes only the cash and the checking deposits.

M2 money supply: The M2 is the calculation of the money supply that includes all the elements of the M1 money supply as well as the near money that includes the savings accounts, money market securities, time deposits and so on.

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Answer 2

Question

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.

Chapter P5, Problem 1KC

To determine

Impact of transferring $1,000 from checking account to savings account on M1 and M2.

Expert Solution & Answer

Answer to Problem 1KC

Option 'd' is correct.

Explanation of Solution

The money supply in the economy is calculated on the basis of various heads used to calculate the supply of money. The method that includes only cash in hand and the checkable deposits in the economy to measure the money supply is known as the M1 money supply. The measure of M2 money supply is more broader than the M1 as it includes all the components of the M1 as well as the components of the near money. The near money includes the savings deposits, money market securities, mutual funds as well as the time deposits in the economy.

Option (d):

The M1 measure of money supply is calculated by summating the cash in hand and the checking accounts. Hence, when the transfer of $1,000 from the checking account to savings account takes place, it reduces the M1 money supply by $1,000 because the savings account is not included in the M1 measure. The M2 remains unchanged because the decrease in checking account is equally credited in the savings account and there is no total change in the amount of M2. This means that the option 'd' is correct.

Option (a):

The M2 remains unchanged because the decrease in checking account is equally credited in the savings account and there is no total change in the amount of M2, but since the M1 only includes the cash in hand and the checking account, the reduction in checking account decreases the M1. This makes option 'a' incorrect.

Option (b):

Since the only two components of the M1 money supply are the cash in hand and the checking account, the reduction of $1,000 from the checking account will reduce the M1 by $1,000. But since the checking account and the savings account are the components of the M2 money supply, the decrease in checking account will equally increase the savings account that keeps the total sum unchanged and thus the M2 remains unchanged. This means that the option 'b' is incorrect.

Option (c):

Since the only two components of the M1 money supply are the cash in hand and the checking account, the reduction of $1,000 from the checking account will reduce the M1 by $1,000. The M2 remains unchanged because the decrease in checking account is equally credited in the savings account and there is no total change in the amount of M2. This means that the option 'c' is also incorrect.

Economics Concept Introduction

M1 money supply: The M1 money supply is the calculation of money supply that includes only the cash and the checking deposits.

M2 money supply: The M2 is the calculation of the money supply that includes all the elements of the M1 money supply as well as the near money that includes the savings accounts, money market securities, time deposits and so on.

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Answer 3

Question

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.

Chapter P5, Problem 1KC

To determine

Impact of transferring $1,000 from checking account to savings account on M1 and M2.

Expert Solution & Answer

Answer to Problem 1KC

Option 'd' is correct.

Explanation of Solution

The money supply in the economy is calculated on the basis of various heads used to calculate the supply of money. The method that includes only cash in hand and the checkable deposits in the economy to measure the money supply is known as the M1 money supply. The measure of M2 money supply is more broader than the M1 as it includes all the components of the M1 as well as the components of the near money. The near money includes the savings deposits, money market securities, mutual funds as well as the time deposits in the economy.

Option (d):

The M1 measure of money supply is calculated by summating the cash in hand and the checking accounts. Hence, when the transfer of $1,000 from the checking account to savings account takes place, it reduces the M1 money supply by $1,000 because the savings account is not included in the M1 measure. The M2 remains unchanged because the decrease in checking account is equally credited in the savings account and there is no total change in the amount of M2. This means that the option 'd' is correct.

Option (a):

The M2 remains unchanged because the decrease in checking account is equally credited in the savings account and there is no total change in the amount of M2, but since the M1 only includes the cash in hand and the checking account, the reduction in checking account decreases the M1. This makes option 'a' incorrect.

Option (b):

Since the only two components of the M1 money supply are the cash in hand and the checking account, the reduction of $1,000 from the checking account will reduce the M1 by $1,000. But since the checking account and the savings account are the components of the M2 money supply, the decrease in checking account will equally increase the savings account that keeps the total sum unchanged and thus the M2 remains unchanged. This means that the option 'b' is incorrect.

Option (c):

Since the only two components of the M1 money supply are the cash in hand and the checking account, the reduction of $1,000 from the checking account will reduce the M1 by $1,000. The M2 remains unchanged because the decrease in checking account is equally credited in the savings account and there is no total change in the amount of M2. This means that the option 'c' is also incorrect.

Economics Concept Introduction

M1 money supply: The M1 money supply is the calculation of money supply that includes only the cash and the checking deposits.

M2 money supply: The M2 is the calculation of the money supply that includes all the elements of the M1 money supply as well as the near money that includes the savings accounts, money market securities, time deposits and so on.

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Answer 4

Question

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.

Chapter P5, Problem 1KC

To determine

Impact of transferring $1,000 from checking account to savings account on M1 and M2.

Expert Solution & Answer

Answer to Problem 1KC

Option 'd' is correct.

Explanation of Solution

The money supply in the economy is calculated on the basis of various heads used to calculate the supply of money. The method that includes only cash in hand and the checkable deposits in the economy to measure the money supply is known as the M1 money supply. The measure of M2 money supply is more broader than the M1 as it includes all the components of the M1 as well as the components of the near money. The near money includes the savings deposits, money market securities, mutual funds as well as the time deposits in the economy.

Option (d):

The M1 measure of money supply is calculated by summating the cash in hand and the checking accounts. Hence, when the transfer of $1,000 from the checking account to savings account takes place, it reduces the M1 money supply by $1,000 because the savings account is not included in the M1 measure. The M2 remains unchanged because the decrease in checking account is equally credited in the savings account and there is no total change in the amount of M2. This means that the option 'd' is correct.

Option (a):

The M2 remains unchanged because the decrease in checking account is equally credited in the savings account and there is no total change in the amount of M2, but since the M1 only includes the cash in hand and the checking account, the reduction in checking account decreases the M1. This makes option 'a' incorrect.

Option (b):

Since the only two components of the M1 money supply are the cash in hand and the checking account, the reduction of $1,000 from the checking account will reduce the M1 by $1,000. But since the checking account and the savings account are the components of the M2 money supply, the decrease in checking account will equally increase the savings account that keeps the total sum unchanged and thus the M2 remains unchanged. This means that the option 'b' is incorrect.

Option (c):

Since the only two components of the M1 money supply are the cash in hand and the checking account, the reduction of $1,000 from the checking account will reduce the M1 by $1,000. The M2 remains unchanged because the decrease in checking account is equally credited in the savings account and there is no total change in the amount of M2. This means that the option 'c' is also incorrect.

Economics Concept Introduction

M1 money supply: The M1 money supply is the calculation of money supply that includes only the cash and the checking deposits.

M2 money supply: The M2 is the calculation of the money supply that includes all the elements of the M1 money supply as well as the near money that includes the savings accounts, money market securities, time deposits and so on.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter P5, Problem 1KC

To determine

Impact of transferring $1,000 from checking account to savings account on M1 and M2.

Expert Solution & Answer

Answer to Problem 1KC

Option 'd' is correct.

Explanation of Solution

The money supply in the economy is calculated on the basis of various heads used to calculate the supply of money. The method that includes only cash in hand and the checkable deposits in the economy to measure the money supply is known as the M1 money supply. The measure of M2 money supply is more broader than the M1 as it includes all the components of the M1 as well as the components of the near money. The near money includes the savings deposits, money market securities, mutual funds as well as the time deposits in the economy.

Option (d):

The M1 measure of money supply is calculated by summating the cash in hand and the checking accounts. Hence, when the transfer of $1,000 from the checking account to savings account takes place, it reduces the M1 money supply by $1,000 because the savings account is not included in the M1 measure. The M2 remains unchanged because the decrease in checking account is equally credited in the savings account and there is no total change in the amount of M2. This means that the option 'd' is correct.

Option (a):

The M2 remains unchanged because the decrease in checking account is equally credited in the savings account and there is no total change in the amount of M2, but since the M1 only includes the cash in hand and the checking account, the reduction in checking account decreases the M1. This makes option 'a' incorrect.

Option (b):

Since the only two components of the M1 money supply are the cash in hand and the checking account, the reduction of $1,000 from the checking account will reduce the M1 by $1,000. But since the checking account and the savings account are the components of the M2 money supply, the decrease in checking account will equally increase the savings account that keeps the total sum unchanged and thus the M2 remains unchanged. This means that the option 'b' is incorrect.

Option (c):

Since the only two components of the M1 money supply are the cash in hand and the checking account, the reduction of $1,000 from the checking account will reduce the M1 by $1,000. The M2 remains unchanged because the decrease in checking account is equally credited in the savings account and there is no total change in the amount of M2. This means that the option 'c' is also incorrect.

Economics Concept Introduction

M1 money supply: The M1 money supply is the calculation of money supply that includes only the cash and the checking deposits.

M2 money supply: The M2 is the calculation of the money supply that includes all the elements of the M1 money supply as well as the near money that includes the savings accounts, money market securities, time deposits and so on.

Answer 6

Chapter P5, Problem 1KC

To determine

Impact of transferring $1,000 from checking account to savings account on M1 and M2.

Expert Solution & Answer

Answer to Problem 1KC

Option 'd' is correct.

Explanation of Solution

The money supply in the economy is calculated on the basis of various heads used to calculate the supply of money. The method that includes only cash in hand and the checkable deposits in the economy to measure the money supply is known as the M1 money supply. The measure of M2 money supply is more broader than the M1 as it includes all the components of the M1 as well as the components of the near money. The near money includes the savings deposits, money market securities, mutual funds as well as the time deposits in the economy.

Option (d):

The M1 measure of money supply is calculated by summating the cash in hand and the checking accounts. Hence, when the transfer of $1,000 from the checking account to savings account takes place, it reduces the M1 money supply by $1,000 because the savings account is not included in the M1 measure. The M2 remains unchanged because the decrease in checking account is equally credited in the savings account and there is no total change in the amount of M2. This means that the option 'd' is correct.

Option (a):

The M2 remains unchanged because the decrease in checking account is equally credited in the savings account and there is no total change in the amount of M2, but since the M1 only includes the cash in hand and the checking account, the reduction in checking account decreases the M1. This makes option 'a' incorrect.

Option (b):

Since the only two components of the M1 money supply are the cash in hand and the checking account, the reduction of $1,000 from the checking account will reduce the M1 by $1,000. But since the checking account and the savings account are the components of the M2 money supply, the decrease in checking account will equally increase the savings account that keeps the total sum unchanged and thus the M2 remains unchanged. This means that the option 'b' is incorrect.

Option (c):

Since the only two components of the M1 money supply are the cash in hand and the checking account, the reduction of $1,000 from the checking account will reduce the M1 by $1,000. The M2 remains unchanged because the decrease in checking account is equally credited in the savings account and there is no total change in the amount of M2. This means that the option 'c' is also incorrect.

Economics Concept Introduction

M1 money supply: The M1 money supply is the calculation of money supply that includes only the cash and the checking deposits.

M2 money supply: The M2 is the calculation of the money supply that includes all the elements of the M1 money supply as well as the near money that includes the savings accounts, money market securities, time deposits and so on.

Answer 7

Chapter P5, Problem 1KC

To determine

Impact of transferring $1,000 from checking account to savings account on M1 and M2.

Answer 8

Expert Solution & Answer

Answer to Problem 1KC

Option 'd' is correct.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Explanation of Solution

The money supply in the economy is calculated on the basis of various heads used to calculate the supply of money. The method that includes only cash in hand and the checkable deposits in the economy to measure the money supply is known as the M1 money supply. The measure of M2 money supply is more broader than the M1 as it includes all the components of the M1 as well as the components of the near money. The near money includes the savings deposits, money market securities, mutual funds as well as the time deposits in the economy.

Option (d):

The M1 measure of money supply is calculated by summating the cash in hand and the checking accounts. Hence, when the transfer of $1,000 from the checking account to savings account takes place, it reduces the M1 money supply by $1,000 because the savings account is not included in the M1 measure. The M2 remains unchanged because the decrease in checking account is equally credited in the savings account and there is no total change in the amount of M2. This means that the option 'd' is correct.

Option (a):

The M2 remains unchanged because the decrease in checking account is equally credited in the savings account and there is no total change in the amount of M2, but since the M1 only includes the cash in hand and the checking account, the reduction in checking account decreases the M1. This makes option 'a' incorrect.

Option (b):

Since the only two components of the M1 money supply are the cash in hand and the checking account, the reduction of $1,000 from the checking account will reduce the M1 by $1,000. But since the checking account and the savings account are the components of the M2 money supply, the decrease in checking account will equally increase the savings account that keeps the total sum unchanged and thus the M2 remains unchanged. This means that the option 'b' is incorrect.

Option (c):

Since the only two components of the M1 money supply are the cash in hand and the checking account, the reduction of $1,000 from the checking account will reduce the M1 by $1,000. The M2 remains unchanged because the decrease in checking account is equally credited in the savings account and there is no total change in the amount of M2. This means that the option 'c' is also incorrect.

Answer 12

Economics Concept Introduction

M1 money supply: The M1 money supply is the calculation of money supply that includes only the cash and the checking deposits.

M2 money supply: The M2 is the calculation of the money supply that includes all the elements of the M1 money supply as well as the near money that includes the savings accounts, money market securities, time deposits and so on.

Answer 13

Ch. P5 - Prob. 1KC Ch. P5 - Prob. 2KC Ch. P5 - Prob. 3KC Ch. P5 - Prob. 4KC Ch. P5 - Prob. 5KC Ch. P5 - Prob. 6KC Ch. P5 - Prob. 7KC Ch. P5 - Prob. 8KC Ch. P5 - Prob. 9KC Ch. P5 - Prob. 10KC

Impact of transferring $1,000 from checking account to savings account on M1 and M2.

Concept explainers

Impact of transferring $1,000 from checking account to savings account on M1 and M2.

Answer to Problem 1KC

Explanation of Solution

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Chapter P5 Solutions