Money supply

Measurement of the money supply

There are several different measures of the money supply, each of which denotes a different degree of liquidity, ranging from notes and coins (which are completely liquid) to those bank deposits that cannot be withdrawn until after a waiting period. The conventional terminology recognises three categories:-

• M3 (M4 in the UK) is known as "broad money", and consists of cash, current account deposits in banks and other financial institutions, savings deposits and time-restricted deposits.
• M1 is known as "narrow money", and consists mainly of cash in circulation and current account deposits.
• M0 (in the UK) is known as the "monetary base" and consists of cash in circulation, cash in banks’ tills and banks’ operational deposits held at the central bank.