Question at position 25 If an individual moves money from a small-denomination time deposit to a savings deposit account, M1 stays the same and M2 increases.M1 increases and M2 stays the same.M1 stays the same and M2 stays the same.M1 increases and M2 decreases.

Question

BlackTom AI · Accepted Answer

M1 is the narrow money supply (currency, traveler's checks, and checkable/deposit accounts usable for payments). M2 equals M1 plus “near-money” (savings deposits, small-denomination time deposits—typically under $100,000—retail money market funds, etc.). Thus both small time deposits and savings deposits are included in M2 but are not part of M1.

1) Relevant knowledge points and concepts
- M1 components: currency, checkable deposits, traveler's checks.
- M2 components: M1 + savings deposits + small time deposits + retail money-market mutual funds.
- Transferring funds between two components that are both included in M2 but excluded from M1 does not change either aggregate.

2) Step-by-step reasoning
Let M1 = A (amount in M1 components). Let B = savings deposits, C = small time deposits. Then M2 = A + B + C.
If an individual moves an amount x from C to B, then new B' = B + x and new C' = C - x.

3) Calculations (intermediate steps)
M1_new = A (no change because neither source nor destination is in M1).
M2_new = A + B' + C' = A + (B + x) + (C - x) = A + B + C = M2_old.
Thus M1 stays the same and M2 stays the same.

4) Why the correct answer is correct
Because both accounts involved (small time deposit and savings deposit) are counted in M2 but not in M1, the internal reallocation cancels out in M2 and leaves M1 unchanged.

5) Why the other options are incorrect
- “M1 stays the same and M2 increases.” Incorrect: moving between two M2 components does not change the total M2.
- “M1 increases and M2 stays the same.” Incorrect: M1 would increase only if funds moved into a checkable deposit or other M1 component, which did not happen.
- “M1 increases and M2 decreases.” Incorrect: transferring from M2 to M1 would shift classification but here both accounts are in M2, so neither aggregate changes.

6) Conclusion
Therefore, M1 stays the same and M2 stays the same, matching the provided correct answer.

Question at position 25 If an individual moves money from a small-denomination time deposit to a savings deposit account, M1 stays the same and M2 increases.M1 increases and M2 stays the same.M1 stays the same and M2 stays the same.M1 increases and M2 decreases.单项选择题

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