The money supply, sometimes referred to as the money stock, has many classifications of liquidity. The total money supply includes all of the currency in circulation as well as liquid financial products, such as certificates of deposit (CDs). The M3 classification is the broadest measure of an economy's money supply.
M3 and M4 are known as broad money. These measures are in decreasing order of liquidity. M1 is the most liquid and easiest for transactions whereas M4 is the least liquid of all. M3 is the most commonly used measure of the money supply.
While M1 includes currency with the public, non-interest bearing deposits with the banking sector including that of RBI, M3 captures the complete balance sheet of the banking sector. M2 and M4 that include post office savings banks deposits are not very widely used.
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. Back to glossary.
M2= M1 + Savings deposits with Post Office savings banks. M3= M1 + Net time deposits of commercial banks. M4 = M3 + Total deposits with Post Office savings organizations (excluding National Savings Certificates) Narrow Money: M1 and M2. Broad Money: M3 and M4.
M0: M0 or MB is the monetary base. It includes currency in circulation (cash in people's purses and wallets) and bank reserves. This is not an actual measure of the money supply (M1 and M2 are). While currency in circulation is part of the M1 and M2 money supply, bank reserves are not part of the money supply.
(i) Full bodied Money: Any unit of money, whose face value and intrinsic value are equal, is known as full bodied money, i.e. Money Value = Commodity Value. For example, during the British period, one rupee coin was made of silver and its value as money was same as its value as a commodity.
Narrow money is the most liquid money in an economy, such as cash and demand deposits, whereas broad money is a wider inclusion of money, including that which is not as liquid, such as long-term deposits and savings deposits.
Broad money is the sum of all liquid financial instruments held by money-holding sectors that are widely accepted in an economy as a medium of exchange, plus those that can be converted into a medium of exchange at short notice at, or close to, their full nominal value.
The cubic metre (in Commonwealth English and international spelling as used by the International Bureau of Weights and Measures) or cubic meter (in American English) is the unit of volume in the International System of Units (SI). Its symbol is m3.
In the United Kingdom, M4 comprises notes and coin in circulation with the public, together with all sterling deposits (including certificates of deposits) held with UK banks and building societies by the rest of the private sector.
franc, originally a French coin but now the monetary unit of a number of countries, notably Switzerland, most French and former Belgian overseas territories, and some African states; at one time it was also the currency of France, Belgium, and Luxembourg.
Dollar amounts are all also referred to as bucks. A five-dollar note is known colloquially as a fin, a fiver, half a sawbuck. A ten-dollar note is known colloquially as a ten-spot, a dixie, a sawbuck, or a tenner. A one hundred-dollar note is known colloquially as a C-Note or a bill (e.g. $500 is 5 bills).
Central bank money is designated as MO in money supply data, whereas commercial bank money is separated into M1 and M3 components. Post-office deposits are also included in the M2 and M4 components.
Commodity money is money whose value comes from a commodity of which it is made. Commodity money consists of objects having value or use in themselves (intrinsic value) as well as their value in buying goods.
The Relationship between M1 and M2 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.
The Kuwaiti Dinar is renowned as the strongest currency in the world. Introduced in 1961, it has maintained a commanding presence due to Kuwait's substantial oil reserves, which account for a significant portion of its economic output.
There are different measures of the money supply. Narrow Money e.g. M0 = This is the level of notes and coins in circulation + banks operational balances at the Bank of England. Broad money e.g. M4 money supply is defined as a measure of notes and coins in circulation (M0) + bank accounts.
Banks create money when they lend the rest of the money depositors give them. This money can be used to purchase goods and services and can find its way back into the banking system as a deposit in another bank, which then can lend a fraction of it.
