If traveler's checks were $1000 higher and saving deposits were $500 higher, M1 would be
A)$500 higher and M2 would be $1,500 higher.
B)$1,000 higher and M2 would be $1,500 higher.
C)M2 and M1 would be $1,500 higher.
D)$1,000 high and M2 would be $500 higher.

Question

Quizplus · Accepted Answer

Traveler's checks are included in both M1 and M2, so if they increase by $1000, both M1 and M2 increase by $1000. Savings deposits are part of M2 but not M1, so if they increase by $500, only M2 increases by an additional $500, making M2 $1500 higher in total.

If Traveler's Checks Were $1000 Higher and Saving Deposits Were