Ava buys a $2,000 computer using a paper check. At which step does $2,000 get recorded in M1?
A. When Ava hands the $2,000 check to the computer merchant.
B. Once the Federal Reserve sends the paper check (or an electronic image) to Ava's bank.
C. The check is never M1. The $2,000 is M1 both in Ava's bank account and, later, in the merchant's account. It is the deposit balance that is counted.
D. Once the $2,000 is credited to the merchant bank's reserve account and is debited from Ava's bank account.
Answer: C
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