Assume that Jimmy Cash has $2000 in his checking account at Folsom Bank and uses his checking account card to withdraw $200 of cash from the banks' ATM machine. By what dollar amount did the M1 money supply change as a result of this single, isolated transaction?

Question

Business

Paloma Dodson

24 February, 17:50

Assume that Jimmy Cash has $2000 in his checking account at Folsom Bank and uses his checking account card to withdraw $200 of cash from the banks' ATM machine. By what dollar amount did the M1 money supply change as a result of this single, isolated transaction?

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Answers (1)

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Foley · Answer 1

It has no effect

Explanation:

M1 includes the currency and checking accounts. The bank account will decrease by 200 (cheking deposit) and increase currency by 200. So it will be the same as before the transactions.

The M1 money supply will not change as a result of this transaction.

In other words, M1 contains cash and near cash equivalent, this transaction do not increase or reduce these concepts.