If Ann Were to Convert Some of Her Checkable Deposits

question 25

Multiple Choice

If Ann were to convert some of her checkable deposits into a certificate of deposit,which of the following changes would take place?

• A) M1 would decrease and then increase; M2 would increase and then decrease.
• B) There would be no changes to M1 or M2.
• C) M1 would decrease; there would be no change in M2.
• D) M1 would increase; M2 would increase.
• E) M1 would decrease; M2 would decrease.

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Definitions:

Aggregate Demand

The cumulative demand for goods and services within an economy, reflecting the total spendable money available at various price points.

Government Economic Policy

The strategies and measures employed by a government to manage its economy, including taxation, spending, and interest rate settings.

Keynesian Approach

A macroeconomic theory that emphasizes the role of government intervention in stabilizing the economy and managing aggregate demand.

Great Depression

A severe worldwide economic downturn that took place during the 1930s, characterized by widespread unemployment, deflation, and a significant decline in economic activity across the globe.