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QUESTION
What is the effect on the money supply when you transfer $150,000 from your checking account to your savings account?
What is the effect on the money supply when you transfer $150,000 from your checking account to your savings account?
Decrease M1; increase M2
Decrease M2; increase M3
No effect on M1; increase M2
No effect on M2; increase M3
Decrease M2; no effect on M3
I think the answer is that there will be no effect on m2 and a decrease in m1 because m2 includes checking account and savings account, which means no change. m1 only includes checking account in this case.
