Macroeconomics Problem Help!! (10 pts!?)?

Question

Here is the problem: Suppose you have $2,000 in currency in a shoebox in your closet. One day, you decide to deposit the money in a checking account. Briefly explain how this will affect M1 (The sum of currency in circulation etc..) and M2 (M1 plus savings account balances etc..)?

Thanks to whoever can help me. I always give best answer!!

Answer 1

Depositing will reduce currency drain and will initiate money-creating multiplier effect. Thus M1 will rise more than initial $2'000. Part will move to longer-term accounts M2 but biggest grow expected to be in M1.

So effect will be dual, M2 will rise due to M1 residual (as summation part of M2) and due to M1 transformation into M2 (into longer-term accounts).