Question

Georgina​ Paul, a student of​ economics, was studying the last​ decade's money supply data for her country X. Georgina noticed that M2 has consistently been higher than M1 and the ratio of M1 to M2 was more or less stable at around 0.3 for most of the years.​ However, although the central bank of X did not conduct any expansionary monetary policy in recent​ times, the ratio​ M1:M2 increased considerably to 0.7 in the last two years. Which of the​ following, had it happened in the last two​ years, would explain this​ outcome? A. Foreign investment in domestic money market mutual funds increased significantly. B. A neighboring​ country, that was earlier using​ X's currency, introduced its own currency. C. With people becoming more​ risk-averse, investment in time deposits increased significantly. D. The central bank introduced interest rates on checking accounts which induced people to move funds from savings to checking accounts. E. The widespread use of credit cards reduced the usage of​ traveler's checks.

Answer 1

The central bank introduced interest rates on checking accounts which induced people to move funds from savings to checking accounts.

Explanation:

Federal legislation restricts the amount of deposits or loans that you may make from a bank or credit union savings or money market account to six per month. When you reach the cap, the bank may charge you a fee — or you can close your account or convert it into a check account.

Another method to transfer funds from investments and bank accounts is through the use of online payment services such as PayPal, Venmo, etc. You must first transfer money out of your savings account to the corresponding payment app wallet and then submit the necessary amount from the bank to the check account.