Money supply

Extracted Attributes

• Alternative Name

  Money stock

• Key Determinants

  Public demand for currency, commercial bank lending, and central bank monetary policy

• Standard Measures

  M1, M2, M3

• Primary Components

  Currency in circulation (banknotes and coins) and demand deposits

• US Reporting Frequency

  Monthly (4th Tuesday of every month via H.6 statistical release)

• Historical Economic Theory

  Quantity theory of money (Monetarism)

Timeline

• Founding of the Federal Reserve; money supply began growing at a higher rate than nominal GNP. (Source: Econlib)

  1913-12-23

• Start of a period where nominal GNP grew faster than the money supply, lasting until 1980. (Source: Econlib)

  1946-01-01

• Central banks began attempting to control money supply growth to manage inflation based on monetarist theories. (Source: Wikipedia)

  1970-01-01

• Money balances began to decline relative to income after a period of growth. (Source: Econlib)

  1986-01-01

• The Conference Board removed the M2 real money supply component from its Leading Economic Index due to poor performance. (Source: Wikipedia)

  2012-01-01

• A significant rise in the US money supply was followed by a notable inflationary episode. (Source: YouTube (Interactive Brokers))

  2021-01-01

Money supply

In macroeconomics, money supply (or money stock) refers to the total volume of money held by the public at a particular point in time. There are several ways to define "money", but standard measures usually include currency in circulation (i.e. physical cash) and demand deposits (depositors' easily accessed assets on the books of financial institutions). Money supply data is recorded and published, usually by the national statistical agency or the central bank of the country. Empirical money supply measures are usually named M1, M2, M3, etc., according to how wide a definition of money they embrace. The precise definitions vary from country to country, in part depending on national financial institutional traditions. Even for narrow aggregates like M1, by far the largest part of the money supply consists of deposits in commercial banks, whereas currency (banknotes and coins) issued by central banks only makes up a small part of the total money supply in modern economies. The public's demand for currency and bank deposits and commercial banks' supply of loans are consequently important determinants of money supply changes. As these decisions are influenced by central banks' monetary policy, not least their setting of interest rates, the money supply is ultimately determined by complex interactions between non-banks, commercial banks and central banks. According to the quantity theory supported by the monetarist school of thought, there is a tight causal connection between growth in the money supply and inflation. In particular during the 1970s and 1980s this idea was influential, and several major central banks during that period attempted to control the money supply closely, following a monetary policy target of increasing the money supply stably. However, the strategy was generally found to be impractical because money demand turned out to be too unstable for the strategy to work as intended. Consequently, the money supply has lost its central role in monetary policy, and central banks today generally do not try to control the money supply. Instead they focus on adjusting interest rates, in developed countries normally as part of a direct inflation target which leaves little room for a special emphasis on the money supply. Money supply measures may still play a role in monetary policy, however, as one of many economic indicators that central bankers monitor to judge likely future movements in central variables like employment and inflation.

Web Search Results

• Money supply - Wikipedia

  In macroeconomics, money supply (or money stock) refers to the total volume of money held by the public at a particular point in time. There are several ways to define "money", but standard measures usually include currency in circulation "Circulation (currency)") (i.e. physical cash) and demand deposits (depositors' easily accessed assets on the books of financial institutions). Money supply data is recorded and published, usually by the national statistical agency or the central bank of the country. Empirical money supply measures are usually named M1, M2, M3, etc., according to how wide a definition of money they embrace. The precise definitions vary from country to country, in part depending on national financial institutional traditions. [...] Even for narrow aggregates like M1, by far the largest part of the money supply consists of deposits in commercial banks, whereas currency (banknotes and coins) issued by central banks only makes up a small part of the total money supply in modern economies. The public's demand for currency and bank deposits and commercial banks' supply of loans are consequently important determinants of money supply changes. As these decisions are influenced by central banks' monetary policy, not least their setting of interest rates, the money supply is ultimately determined by complex interactions between non-banks, commercial banks and central banks. [...] Even though today central banks generally do not try to determine the money supply, monitoring money supply data may still play a role in the preparation of monetary policy as part of a wide array of financial and economic data that policymakers review. Developments in money supply may contain information of the behavior of commercial banks and of the general economic stance which is useful for judging future movements in, say, employment and inflation. Also in this respect, however, money supply data have a mixed record. In the United States, for instance, the Conference Board Leading Economic Index originally included a real money supply (M2) component as one of its 10 leading indicators, but removed it from the index in 2012 after having ascertained that it had performed poorly as a

• Money supply | Definition & Facts - Britannica

  money supply, the liquid assets held by individuals and banks. The money supply includes coin, currency, and demand deposits (checking accounts). Some economists consider time and savings deposits to be part of the money supply because such deposits can be managed by governmental action and are involved in aggregate economic activity. These deposits are nearly as liquid as currency and demand deposits. Other economists believe that deposits in mutual savings banks, savings and loan associations, and credit unions should be counted as part of the money supply. (Read Milton Friedman’s Britannica entry on money.) [...] (Read Milton Friedman’s Britannica entry on money.) The Federal Reserve Board in the United States and the Bank of England in the United Kingdom regulate the money supply to stabilize their respective economies. The Federal Reserve Board, for example, can buy or sell government securities, thereby expanding or contracting the money supply (see monetary policy). Britannica Quiz Money, Money, Money QuizThe Editors of Encyclopaedia BritannicaThis article was most recently revised and updated by Adam Augustyn. [...] History & SocietyScience & TechBiographiesAnimals & NatureGeography & TravelArts & CultureProConGames & QuizzesVideosOn This DayOne Good FactDictionary Lifestyles & Social Issues Philosophy & Religion Politics, Law & Government World History Health & Medicine Science Technology Browse Biographies Birds, Reptiles & Other Vertebrates Environment Fossils & Geologic Time Insects & Other Invertebrates Mammals Plants Geography & Travel Entertainment & Pop Culture Literature Sports & Recreation Visual Arts Image GalleriesInfographicsPodcastsSummariesTop QuestionsBritannica Kids Read More Federal Reserve SystemEuropean Central Bankagricultural economics # money supply economics Written and fact-checked byThe Editors of Encyclopaedia Britannica

• What is the money supply? Is it important? - Federal Reserve Board

  Other Regulations Supervision & Enforcement Community Development Research & Analysis Resources for Consumers ## FAQs ##### Have a question? ### What is the money supply? Is it important? The money supply is the total amount of money—cash, coins, and balances in bank accounts—in circulation. The money supply is commonly defined as a group of safe assets that households and businesses can use to make payments or to hold as short-term investments. For example, U.S. currency and balances held in checking accounts and savings accounts are included in many measures of the money supply. There are several standard measures of the money supply, including the monetary base, M1, and M2: [...] Data on money supply are reported in the Federal Reserve's H.6 statistical release, "Money Stock Measures." Over some periods, measures of the money supply have exhibited close relationships with important economic variables such as nominal gross domestic product and the price level. The Federal Open Market Committee reviews money supply data in conducting monetary policy, but money supply figures are just part of a wide array of financial and economic data that policymakers review. #### Related Information Statistics & Historical Data ###### Board of Governors of the Federal Reserve System ###### Tools and Information ###### Stay Connected Link to USA.gov Link to Open.gov Board of Governors of the Federal Reserve System

• Money Supply - Econlib - The Library of Economics and Liberty

  SHARE POST: ## What Is the Money Supply? The U.S. money supply comprises currency—dollar bills and coins issued by the Federal Reserve System and the U.S. Treasury—and various kinds of deposits held by the public at commercial banks and other depository institutions such as thrifts and credit unions. On June 30, 2004, the money supply, measured as the sum of currency and checking account deposits, totaled $1,333 billion. Including some types of savings deposits, the money supply totaled $6,275 billion. An even broader measure totaled $9,275 billion. [...] Because money is used in virtually all economic transactions, it has a powerful effect on economic activity. An increase in the supply of money works both through lowering interest rates, which spurs investment, and through putting more money in the hands of consumers, making them feel wealthier, and thus stimulating spending. Business firms respond to increased sales by ordering more raw materials and increasing production. The spread of business activity increases the demand for labor and raises the demand for capital goods. In a buoyant economy, stock market prices rise and firms issue equity and debt. If the money supply continues to expand, prices begin to rise, especially if output growth reaches capacity limits. As the public begins to expect inflation, lenders insist on higher [...] From the founding of the Federal Reserve in 1913 until the end of World War II, the money supply tended to grow at a higher rate than the growth of nominal GNP. This increase in the ratio of money supply to GNP shows an increase in the amount of money as a fraction of their income that people wanted to hold. From 1946 to 1980, nominal GNP tended to grow at a higher rate than the growth of the money supply, an indication that the public reduced its money balances relative to income. Until 1986, money balances grew relative to income; since then they have declined relative to income. Economists explain these movements by changes in price expectations, as well as by changes in interest rates that make money holding more or less expensive. If prices are expected to fall, the inducement to

• Money Supply (M2) - Economics - YouTube

  [Music] the money supply also known as M2 the money supply tells us how many US dollars are available in the economy the supply of money is calculated by the American Central Bank the Federal Reserve or simply known as the FED It generally includes the cash in circulation cash in bank accounts cash in Bank labeled reserves and Retail money market funds the FED adds up all of these components to calculate the total money supply the FED also regulates Banks has access to bank information and are able to publish data on the banking system these data are released on the fourth Tuesday of every month at generally 1 p.m. it's published within the money stock H6 release to inform the public of the amount of liquidity or cash in the financial system and with detailed information for each [...] # Economics - Money Supply (M2) ## Interactive Brokers 127000 subscribers 35 likes ### Description 2872 views Posted: 26 Mar 2024 The money supply lesson discusses how M2 is calculated, where to find it, how it’s influenced and how it influences financial markets and the economy. It specifically covers some of the most popular tools used by global central banks and governments to influence the supply of money. In addition, the course covers the money supply rise in the United States and the subsequent inflationary episode in 2021. Study notes and other lessons: [...] to banks in exchange for cash increases interest rates and increases the amount of reserves that need to be held by banks in order to make money less available accommodative Financial conditions or loosening leads to a boost in the money supply while restrictive Financial conditions or tightening leads to a stable money supply from a congressional perspective increases in borrowing and spending will also boost the money supply while decreases in borrowing and spending will lead to a stable money supply a significant increase in the money supply will almost always lead to significant inflation unless productivity gains offset the money supply increase a rare event also if the money supply Rises interest rates globally will drift lower the global money supply will increase and Global prices