Money, Banking, and the Federal Reserve System End of Chapter Problem

For each of the following transactions, what is the initial effect (increase or decrease) on M2?

You sell a few shares of stock and put the proceeds into your savings account.

You sell a few shares of stock and put the proceeds into your checking account.

You transfer money from your savings account to your checking account.

You discover $0.25 under the floor mat in your car and deposit it in your checking account.

You discover $0.25 under the floor mat in your car and deposit it in your savings account.

Place each transaction according to its effect on M2.

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M2 increases

M2 decreases

M2 unchanged

Answer Bank

Find $0.25, deposit into savings

Transfer from savings to checking

Sell stock, proceeds to checking

Find $0.25, deposit into checking

Sell stock, proceeds to savings