Answered

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Use the data in the table below to answer this question.
Currency held by the public $200 billion
Checkable deposits $700 billion
Traveler's checks $10 billion
Small time and savings deposits $500 billion
Money market accounts $200 billion
Overnight repurchase agreement $120 billion
Overnight Eurodollars $100 billion
Total bank reserves $87.5 billion
Excess reserves $0
If depositors move $50 billion from small time deposits into checkable deposits, then the
value of M1:
a. increases by $50 billion, the value of M2 decreases to $1,780 billion, and the system
becomes more liquid.
b. Increases by $50 billion, the value of M2 stays $1,830 billion, and the system
becomes more liquid
c. stays $900 billion, the value of M2 decreases by $50 billion, and the system becomes
more liquid
d. increases to $750 billion, the value of M2 stays the same, and the system becomes
less liquid

Sagot :

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