Question

I need to know what happens to the M1 and M2 for each (For 1 & 2). Answer choices are [increase, decrease, unchanged]

1.) Ethel pulls $10,000 out from under her bed and deposits it in her savings account. As a result M1 _______ and M2 _________

2.) Joel purchases a share of Microsoft Stock through a broker for $44 from Celeste. Joel pays for the stock with funds from his Money Market brokerage account and Celeste deposits the proceeds from the sale in her checking account. As a result of this transaction M1 ______and M2__________

3.)

Hyperinflation occurred in Zimbabwe as a result of

a.) excess creation of inside money by the government.

b.) excess creation of outside money by the government.

c.) excess creation of inside money by the banking system.

d.) high resource prices.

5.)

Shares in the Federal Reserve Banks are owned by

a.
the federal government of the United States.

b.
the governments of the states in which they are located.

c.
private citizens who own stock in them.

d.
banks that are members of the Federal Reserve System.

Answer 1

1. M1 unchanged, M2 increase
M1: cash + checking accounts
M2:M1+savings accounts deposits

2. M1 unchanged, M2 Unchanged
M3 = M2+money market brokerage
So, when money is transferred from M3 to checking account, it do not affect M1 and M2 as they are included

3. Option a. In order to pay for the government spending the government prints more money reducing the value of currency

5. Option d
In order to be a member of Federal Reserve System, banks must own shares of stock.