Solved by Expert Tutors
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Question

Jane currently has $4,800 in her savings account and $2,000 in her checking account at the local bank.

 

Instructions: Use a positive number to represent an increase and a negative number to represent a decrease.

 

a. Suppose she withdraws $500 in cash from her savings account. By what dollar amount does the country's money supply (M1 and M2) change as a result of Jane's actions?

 

    Change in M1: $ 

 

    Change in M2: $ 

 

b. Now suppose instead that Jane withdraws $500 from her checking account and uses $200 of this money to pay her federal income tax. After that, she uses $250 to buy a set of used golf clubs from her neighbor who deposits it into his checking account. Finally, she deposits the remaining cash from the $500 withdrawal into her savings account. By what dollar amount does the country's money supply change as a result of Jane's actions?

 

    Change in M1: $ 

 

    Change in M2: $ 

Step-by-step answer

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