Suppose Ronny decides to withdraw all the cash out of his checking account and open a single time deposit acco?

a) M2 falls but M1 remains unchanged.


b) M1 falls but M2 remains unchanged.


c) M1 and M2 both remain unchanged.


d) M1 and M2 both fall.|||b) M1 falls but M2 remains unchanged.





M1 includes the types of money that is typically used to finance everyday transactions; a checking account qualifies as being part of M1, but a time deposit account does not.





M2 includes everything that is included in M1, plus time deposits.





Transferring money from checking to savings (time deposit) would thus decrease M1, but not change M2.