Other Things Constant, Which of the Following Would Cause the M1

question 42

Multiple Choice

Other things constant, which of the following would cause the M1 money supply to decline?

• A)an increase in the quantity of U.S.currency held overseas
• B)a shift of funds from interest-earning checking deposits to money market mutual funds
• C)a reduction in the general public's holdings of currency outside of banks because debit cards have become more popular and widely accepted
• D)a shift of funds from money market mutual funds into stock and bond mutual funds because the fees to invest in the latter have declined

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Definitions:

Aggregate Supply Curve

A graph that shows the relationship between the overall price level in the economy and the total output produced by firms, holding all else constant.

Price Level

Price Level is a measure of the average prices of goods and services in an economy, indicating the purchasing power of the currency and cost of living.

Real GDP

Real GDP, or Gross Domestic Product adjusted for inflation, measures the value of all final goods and services produced within a country in a given period, accounting for changes in price level.

Classical Economists

Economists of the late 18th and 19th centuries who believed in free markets, minimal government intervention, and the importance of competition.