As debit cards become more popular, individuals will reduce their holdings of currency. Other things constant, how will this impact the money supply?
a. Because more money is held as deposits at banks, the money supply will fall.
b. Because more money is held as deposits at banks, the money supply will expand.
c. Because debit card expenditures are counted in M2 but not M1, the M1 money supply will fall.
d. Because debit card expenditures are counted in M1 but not M2, the M2 money supply will fall.
B
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