Question

I need to know what happens to the M1 and M2 for each (For 1 & 2). Answer choices are [increase, decrease, unchanged]

1.) Ethel pulls $10,000 out from under her bed and deposits it in her savings account. As a result M1 _______ and M2 _________

2.) Joel purchases a share of Microsoft Stock through a broker for $44 from Celeste. Joel pays for the stock with funds from his Money Market brokerage account and Celeste deposits the proceeds from the sale in her checking account. As a result of this transaction M1 ______and M2__________

3.)

Hyperinflation occurred in Zimbabwe as a result of

a.) excess creation of inside money by the government. b.) excess creation of outside money by the government. c.) excess creation of inside money by the banking system. d.) high resource prices. 5.) Shares in the Federal Reserve Banks are owned by a. the federal government of the United States. b. the governments of the states in which they are located. c. private citizens who own stock in them. d. banks that are members of the Federal Reserve System.

Answer 1

Answer 1: Ethel pulls $10,000 out from her bed and deposit in her saving account. As a result M1 has not changed because saving balance is not part of M1 where as M2 has increased because the balance of saving account is part of it.

Answer 2 : Joel purchased a share of Microsoft stock and effect on the M1 and M2 is that they remain unchanged. As checking balance of one account has been transferred to another.

Answer 3 : Hyperinflation occurred in Zimbabwe as a result of excess creation of inside money by the government. It means that government printing there money to pay there national debt. There is lack of confidence in government, economy and political life. It has increased the money supply.

Answer 4 : Shares in the federal reserve Bank are owned by banks that are members of the federal reserve system.As federal reserve Bank system is a corporation . There are 12 federal reserve bank located all over United States.