If an Individual Moves Money from a Demand Deposit Account

question 81

Multiple Choice

If an individual moves money from a demand deposit account to a money market mutual fund,________.

• A) M1+ decreases and M2 stays the same
• B) M1+ stays the same and M2+ increases
• C) M1+ stays the same and M2 stays the same
• D) M1+ increases and M2 decreases

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Definitions:

Variable Factor

An input in the production process that can be changed in the short term to influence output.

Fixed Factors

Inputs in the production process that cannot be easily increased or decreased in the short term, such as machinery or land.

Perfect Certainty

A situation in decision making where all outcomes are known and there is no ambiguity or risk.

Immediate Profits

Earnings realized in the short term, reflecting the current operations of a business rather than long-term investments.