In using the Easy Pay System (EPS) to settle a payment in exchange, an amount of money is immediately transferred from the buyer’s bank account to the seller’s. In response to an increase in EPS’s service charge, some shops have stopped accepting payment by EPS.
Which of the following would be the immediate effect of the above change on the money supply M1 and M2?
A. Both M1 and M2 will increase.
B. M1 will increase and M2 will remain unchanged.
C. M1 will increase and M2 will decrease.
D. Both M1 and M2 will decrease.