What is the M1 M2 and M3 money measurements? (2024)

What is the M1 M2 and M3 money measurements?

M1: Currency in circulation plus overnight deposits. M2: M1 plus deposits with an agreed maturity up to two years plus deposits redeemable at a period of notice up to three months. M3: M2 plus repurchase agreements plus money market fund (MMF) shares/units, plus debt securities up to two years.

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What is M1, M2, and M3 money?

M1, M2 and M3 are measurements of the United States money supply, known as the money aggregates. M1 includes money in circulation plus checkable deposits in banks. M2 includes M1 plus savings deposits (less than $100,000) and money market mutual funds. M3 includes M2 plus large time deposits in banks.

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Which measurement of money out of M1 M2 M3 M4 is called broad money?

Narrow money is also known as M1 and M2. Broad money means M3 and M4. The liquidity of these grades is decreasing. M1 is the most liquid and makes transactions the easiest, while M4 is the least liquid. The most commonly used indicator of the money supply is M3.

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What are M1 and M2 called money?

M1 and M2 money are the two mostly commonly used definitions of money. M1 = coins and currency in circulation + checkable (demand) deposit + traveler's checks + saving deposits. M2 = M1 + money market funds + certificates of deposit + other time deposits.

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What is the M2 measure of money?

M2 is a measure of the money supply that includes cash, checking deposits, and other deposits readily convertible to cash, such as CDs. M1 is an estimate of cash, checking, and savings account deposits only. The weekly M2 and M1 numbers are closely monitored as indicators of the overall money supply.

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What is considered M3 money?

Definition of. Broad money (M3) Broad money (M3) includes currency, deposits with an agreed maturity of up to two years, deposits redeemable at notice of up to three months and repurchase agreements, money market fund shares/units and debt securities up to two years.

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What is the M3 money measurement?

M3 is a measure of the money supply that includes M2 as well as large time deposits, institutional money market funds, short-term repurchase agreements (repo), and larger liquid assets.

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Why is M3 called broad money?

M3 measurement of money supply is a broader concept of money supply compared to M1. Besides all the components of M1, it includes net time deposits (or fixed deposits or term deposits) of the people with the commercial banks. Therefore, M3 is also called broad money.

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What is the M1 measure of money?

The M1 money supply includes all physical currency, traveler's checks, demand deposits, and other checkable deposits (e.g. checking accounts). While the M1 is a measure of all the most liquid forms of money in an economy, other forms of money supply are slightly different.

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What is the difference between M1 and M2 and M3 and M4 money?

The United States, for example, does not use M0 or M4 in its classification. They use M1-M3 only, with M1 including all forms of narrow money. In this case, M1 includes more liquid money, such as coins or notes. On the other hand, M2 or M3, such as money market funds, are less liquid.

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What are M1 and M2 examples?

Money is measured with several definitions: M1 includes currency and money in checking accounts (demand deposits). Traveler's checks are also a component of M1, but are declining in use. M2 includes all of M1, plus savings deposits, time deposits like certificates of deposit, and money market funds.

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What is the definition of M1 M2 M3 M4?

M0 = Currency notes + coins + bank reserves. M1 = M0 + demand deposits. M2 = M1 + marketable securities + other less liquid bank deposits. M3 = M2 + money market funds. M4 = M3 + least liquid assets.

What is the M1 M2 and M3 money measurements? (2024)
Is M2 called narrow money?

While M1/M0 are used to describe narrow money, M2/M3/M4 qualify as broad money and M4 represents the largest concept of the money supply.

What are examples of M2 money?

M2 is a measure of the U.S. money stock that includes M1 (currency and coins held by the non-bank public, checkable deposits, and travelers' checks) plus savings deposits (including money market deposit accounts), small time deposits under $100,000, and shares in retail money market mutual funds.

Is bitcoin M1 or M2?

Because Bitcoin can be used to purchase goods and services immediately, it would be included in M1 and would cause M1 to rise. Also, as discussed above, everything in M1 is included in M2, so if M1 rises, so will M2.

Is a credit card M1 or M2?

A credit card is not a part of the M1 or M2 money supply, and as a matter of fact, is not part of the money supply at all. This is because money supply is the aggregate value of monetary assets, and does not include liabilities. Credit card balance represents a liability, not an asset.

Are M1 and M3 narrow money?

Although M1/M0 is used to characterise narrow money, M2/M3/M4 counts as broad money and M4 represents the biggest money supply term.

Is M3 and M4 broad money?

The money represented by M3 and M4 includes time deposits. It means they cannot be withdrawn or used by the people immediately like M1 and M2, which represent narrow money. Therefore, M3 and M4 are termed as broad money.

Why is M1 called narrow money?

M1 measurement of money supply includes only currency which inmost liquid form such as currency held by public in terms of coins and paper notes and demand deposits of the people with the commercial banks. Therefore, M1 is also called narrow money.

What is the M4 money measure?

These measures can vary from country to country and are often used for specialised analysis. M4 = M3 + Total Deposits with Post Office Savings. Think of it as having different categories to understand all the different forms of money and financial assets within an economy.

What are the three units of money?

Lesson summary
  • a medium of exchange,
  • a store of value, and.
  • a unit of account.

What is M4 money?

Broad money e.g. M4 money supply is defined as a measure of notes and coins in circulation (M0) + bank accounts.

What does M2 stand for?

square meter (meter squared)

What is the difference between M1 and M3 money supply?

M3 is broad money. M3 = M1 + Time deposits with the banking system. M2 = M1 + Savings deposits of post office savings banks. M1 = Currency with public + Demand deposits with the Banking system (savings account, current account).

What is M1 also known as?

M1, also called narrow money, is often synonymous with "money supply" in reports from the financial media. This is a count of all of the notes and coins that are in circulation, whether they're in someone's wallet or in a bank teller's drawer, plus other money equivalents that can be converted easily to cash.


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