M1 will decrease, M2 will stay the same, after deciding to buy some money market mutual fund shares.
What are mutual funds?
- A corporation that pools money from several people and invests it in securities like stocks, bonds, and short-term debt is known as a mutual fund. The portfolio of a mutual fund refers to all of its holdings. Mutual fund shares are purchased by investors.
- Each share reflects a shareholder's ownership interest in the fund and the revenue it produces. Money market funds, bond funds, stock funds, and target date funds are the four primary categories into which most mutual funds fit.
Money market funds are comparatively risk-free. They are only permitted by law to invest in a select group of high-quality, short-term securities issued by American businesses and national, state, and municipal governments.
Therefore, M1 will decrease, M2 will stay the same.
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