Specifically state what should happen to both Money supply
1 and Money supply 2 (increase, decrease, no change) due
to each
of the following events. Consider each
lettered event to be independent of the others.
a. You take your spring break trip to El Salvador where you
spend $2,500 in U.S. currency in the local communities.
b. Warning signs about the U.S. economy cause banks to reduce
their net lending in the 3rd quarter by 3.5%.
c. Instead of El Salvador, you decide to take your spring break
trip to Las Vegas. Knowing your luck, you redeem
$10,000 worth of personal CDs in cash for the
trip.
d. U.S. banks sell $12 billion worth of U.S. Treasury securities
to the Federal Reserve.
e. Higher interest rates cause individuals to collectively
withdraw $50b from their savings accounts and put it
into their money market deposit accounts