If your grandmother gives you a $20 bill and you deposit that into your and M2 Money. checking account, then M1 money. O stays the same; stays the same O decreases; increases increases; increases O increases; decreases O increases; stays the same

If your grandmother gives you a $20 bill and you deposit that into your and M2 Money. checking account, then M1 money. O stays the same; stays the same O decreases; increases increases; increases O increases; decreases O increases; stays the same

Economics Today and Tomorrow, Student Edition

1st Edition

ISBN:9780078747663

Author:McGraw-Hill

Publisher:McGraw-Hill

Chapter3: Your Role As A Consumer

Section3.1: Consumption, Income, And Decision Making

Problem 2R

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Concept explainers

Required Reserve and Excess Reserve Analysis

A required reserve is an amount of cash that banks must keep with themselves, which is certain percentage of the deposits made by their customers. Required reserve is a percentage of the bank's deposits that the respective bank must have on each overnight. The percentage rate is set and determined by the nation’s central bank. It is important to have such funds accumulated to meet its uncertain obligations, sudden liabilities and withdrawals. Required reserve is also known as reserve ratio. Reserve ratio is an important tool to control the money supply.

Question

If your grandmother gives you a $20 bill and you deposit that into your
and M2 Money.
checking account, then M1 money.
O stays the same; stays the same
O decreases; increases
increases; increases
O increases; decreases
increases; stays the same

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