Box 1: VM1 and VM2 continue to run
The budget alerts are for Resource Group RG1, which include VM1, but not VM2. However, when the budget thresholds you've created are exceeded, only notifications are triggered. None of your resources are affected and your consumption isn't stopped.
Box 2: one email notification will be sent each month.
Budget alerts for Resource Group RG1, which include VM1, but not VM2.VM1 consumes 20 Euro/day. The 50%, 500 Euro limit, will be reached in 25 days, and an email will be sent.
The 70% and 100% alert conditions will not be reached within a month, and they don't trigger email actions anyway.
Credit alerts: Credit alerts are generated automatically at 90% and at 100% of your Azure credit balance. Whenever an alert is generated, it's reflected in cost alerts and in the email sent to the account owners. 90% and 100% will not be reached though.
Reference:
https://docs.microsoft.com/en-us/azure/cost-management-billing/costs/cost-mgt-alerts-monitor-usage-spending
https://docs.microsoft.com/en-gb/azure/cost-management-billing/costs/tutorial-acm-create-budgets
