Money Supply Measurement
Definition
Money supply measurement refers to methods used by economists and policymakers to track and quantify the amount of money circulating within an economy at any given time.
Analogy
Picture yourself counting all the coins you have saved in a jar. Money supply measurement is like counting all the coins in an entire city or country to understand how much money is available for people to use.
Related terms
M1: A narrow measure of the money supply that includes physical currency, demand deposits (checking accounts), and traveler's checks.
M2: A broader measure of the money supply that includes M1 plus savings deposits, time deposits (certificates of deposit), and certain money market funds.
Monetary Base: The total amount of currency in circulation plus reserves held by banks at the central bank, which serves as the foundation for the money supply.
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