As the money supply consists of both currency & balances in different accounts, it is used by top financial institution to make economic decisions.
<h3>What is a money supply?</h3>
This refers to the total amount of money such as cash, coins, balances in bank accounts that are in circulation in a year.
<h3>M1</h3>
The M1 means the most liquid money that comprised of the currency, traveler’s check, and checking account deposits.
- M1 = Currency + traveler check + checking account deposits.
<h3>M2</h3>
The M2 is broader measure of Ms although it is has a less liquid measure compared to M1 and consists of currency, traveler’s checks, checking deposits, savings accounts, money market mutual funds etc
- M2 = M1 + savings accounts deposits + money market mutual funds.
<h3>M3</h3>
The M3 is broader measure of Ms as it includes M2 money as well as large time deposits, institutional money market funds, short-term repurchase agreements, larger liquid funds etc.
- M3 = M1 + Time deposits with commercial banks (Fixed deposits, Recurring deposits).
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