State the immediate effect of each of the following actions on M1 and M2: Instructions: If there is no change in M1 or M2, enter zero as your response. a. Barry writes his plumber a check for $200. The plumber takes the check to the bank, keeps $50 in cash, and deposits the remainder in his savings account. M1 declines by $ 0 . M2 does not change by $ 0 . b. Maureen deposits the $1,000 from her CD in a money market mutual fund. M1 does not change by $ 0 . M2 does not change by $ 0 . c. Sylvia withdraws $50 in cash from her savings account. M1 rises by $ 0 . M2 does not change by $ 0 .

M1 is a measure of money that includes the most liquid of cash instruments such as physical cash, checkable deposits, and traveler's checks.

M2 is the next level in the money hierarchy and includes M1 along with less liquid instruments such as savings deposits, certificates of deposits, as well as money market funds.

a. Barry writes his plumber a check for $200. The plumber takes the check to the bank, keeps $50 in cash, and deposits the remainder in his savings account.

M1 declines by $150.

Barry's Checkable deposit was reduced by $200 and only $50 remained as cash with the plumber with the rest going to a savings account. that $50 is the only M1 measure left as savings do not fall under M1.

M2 does not change

Both M1 and savings fall under M2 so this does not change.

b. Maureen deposits the $1,000 from her CD in a money market mutual fund.

Both M1 and M2 do not change.

Neither CDs nor Money Market Mutual funds fall under M1 so it is not affected.

Both CDs and Money Market Mutual funds fall under M2 so it is not affected as well.

c. Sylvia withdraws $50 in cash from her savings account.

M1 rises by $50

Cash increased by $50 and cash is an M1 measure so M1 will increase by $50.

M2 does not change.

Both the Savings Account and M1 are part of M2 so M2 does not change.

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