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John Withdraws $100 from His Chequing Account and Deposits It

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Essay

John withdraws $100 from his chequing account and deposits it in his saving account. What will be the effect of this transaction on different measures of money, such as C, M1, and M2?


Definitions:

Inelastic

Inelastic describes a situation where the demand or supply for a good or service is not significantly changed by variations in price.

Consumer Surplus

The difference between the maximum price a consumer is willing to pay for a good or service and the actual price they do pay.

Tax

A mandatory monetary contribution or different sort of tax levied on a taxpayer by a government entity to finance government expenditure and assorted public costs.

Deadweight Loss

The loss of economic efficiency that can occur when the equilibrium for a good or service is not achieved or is distorted.

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