M3
Definition
M3 represents the broadest measure of money supply. It includes all components of both M1 and M2 plus large time deposits held by institutional investors.
Analogy
Think of M3 as the ultimate measure of financial resources available in an economy. It's like having not only cash in hand, savings accounts, and certificates of deposit but also substantial investments made by big institutions.
Related terms
Money Market Mutual Funds (MMMFs): MMMFs are investment funds that pool money from multiple investors to purchase short-term debt securities such as Treasury bills and commercial paper.
Hyperinflation: Hyperinflation refers to a rapid and uncontrollable increase in prices within an economy, often leading to a loss of confidence in the currency.
Velocity of Money: Velocity of money measures how quickly money circulates through an economy. It is calculated by dividing nominal GDP by the average money supply.
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