Suppose You Transfer $1,000 from Your Checking Account to Your

question 33

Multiple Choice

Suppose you transfer $1,000 from your checking account to your savings account. How does this action affect the M1 and M2 money supplies?

• A) M1 and M2 are both unchanged.
• B) M1 falls by $1,000, and M2 rises by $1,000.
• C) M1 is unchanged, and M2 rises by $1,000.
• D) M1 falls by $1,000, and M2 is unchanged.

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Definitions:

Economic Growth

An increase in the production of goods and services in an economy over a period of time, typically measured by the rise in the Gross Domestic Product (GDP).

Production Possibilities Frontier

A graph that illustrates all the highest production options for two or more products, based on a specific set of resources, such as labor and materials.

Trade-Offs

The concept of giving up one thing in return for gaining another, often used in the context of making decisions that involve a compromise.

Policy Decisions

Choices made by governments or organizations regarding laws, regulations, and actions to achieve specific economic or social goals.