Answers
a. M1- increases, M2-no change.
Moving money from one account to another doesnot change M2 as it is already included in it. But it will increase M1 as more money is put into circulation.
b. M1- No change , M2-No change.
as M1 doesnot include savings account and time deposits it is not affected. The money reedemed is deposited into savings account so it is already included in M2 therfore no change
c.
M1 decrease, M2 decreases.
the money supply will decrease when it purachases treasury securities from Federal reserve and it will lead to a decrease in M1 and M2 .t
d. M1 increases, M2- no change
as more loans are approved, the money supply increases
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