Suppose your bank raises its minimum-balance requirement for free checking on checking accounts by $500. You take $500 out of your passbook savings account and put it in your checking account. What is the overall effect on M1 and M2?
(a) M1 rises by $500, M2 falls by $500.
(b) M1 is unchanged, M2 is unchanged.
(c) M1 rises by $500, M2 is unchanged.
(d) M1 is unchanged, M2 falls by $500.
Answer: C
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