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The different measures of money supply

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Explain the different measures of the money supply, and explain why the different definitions are important.

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Money exists in different forms. This solutions identifies and defines the different measures of the money supply. It explains also why the different definitions of money are important.

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These are the different measures of Money Supply:

1. "M1"

M1 consists of the most highly liquid assets. It includes all forms of assets that are easily exchangeable as payment for goods and services.
These are:
a.) coin and currency in circulation
b.) traveler's checks
c.) demand deposits
d) Other checkable deposits.

2. "M2"

M1 it includes all of M1, the most liquid assets, and a collection of additional assets that are slightly less liquid.
These additional assets include:
a.) savings accounts
b.) money market deposit accounts
c.) small time deposits (less than $100,000) (these would include ...

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