SOLVED

11) The M2 measure of the money supply equals A) savings account balances plus small-denomination time deposits plus traveler’s checks. B) savings account balances plus small-denomination time deposits plus noninstitutional money market fund shares. C) M1 plus savings account balances plus small-denomination time deposits. D) M1 plus savings account balances plus small-denomination time deposits plus noninstitutional money market fund shares. 12) You earn $500 a month, currently have $200 in currency, $100 in your checking account, $2,000 in your savings accounts, $3,000 worth of illiquid assets and $1,000 of debt. You have A) money = $2,300, annual income = $6,000, and wealth = $5,000. B) money = $300, annual income = $6,000, and wealth = $4,300. C) money = $200, annual income = $500, and wealth = $4,300. D) money = $300, annual income = $6,000, and wealth = $5,000. 13) If a person withdraws $500 from his/her savings account and puts it in his/her checking account, then M1 will ________ and M2 will ________.  A) increase; decrease B) increase; not change C) not change; increase D) not change; decrease E) not change; not change 14) If a person withdraws $500 from his/her checking account and holds it as currency, then M1 will ________ and M2 will ________.  A) increase; decrease B) not change; not change C) not change; increase D) decrease; increase E) decrease: decrease 15) If a person takes $100 from his/her piggy bank at home and puts it in his/her savings account, then M1 will ________ and M2 will ________.  A) increase; increase B) not change; increase C) decrease; increase D) decrease; not change E) increase; decrease 16) If credit card balances rise in the economy, then M1 will ________ and M2 will ________.  A) increase; increase B) not change; increase C) decrease; increase D) not change; not change E) increase; decrease 17) Refer to Scenario 16-1. M1 in this simple economy equals A) $1,000. B) $2,000. C) $3,000. D) $8,000. 18) Refer to Scenario 16-1. M2 in this simple economy equals A) $3,000. B) $8,000. C) $14,000. D) $21,000. 19) If households and firms decide to hold less of their money in checking account deposits and more in currency, then the money supply A) will not change. B) will increase. C) will decrease. D) may increase or decrease. 20) Liquidity increases as we move from the M1 to the M2 definition of the money supply. 21) The U.S. government makes a profit from issuing fiat money. 22) The amount of national income in an economy equals the money supply in an economy. 23) Suppose you withdraw $1,000 from your savings account and put it under your mattress. Briefly explain how this will affect M1 and M2. 24) Suppose you withdraw $1,000 from your savings account and put it in your checking account. Briefly explain how this will affect M1 and M2.