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Money supply

Money supply is the total amount of issued paper money and coins in circulation, as well as funds on the current bank accounts. In statistics reports, the sum of cash resources is often singled out from the total amount of money supply in turnover.

Concept of monetary aggregates:

The values of Money Supply (M0, M1, M2, M3, and M4) are important macroeconomic indicators. In fact, with their help the total money supply of the country can be measured.

The money aggregate M0 characterizes the total cash resources in circulation of the given country.

M1 = M0 + the checking deposits, i.e. it includes the most liquid resources: cash currency, demand deposits, and travelers’ checks.

M2 = M1 + time deposits, deposits up to $100,000, i.e. it includes М1, time deposits (less than $100,000) and other highly liquid savings.

M3 = M2 + large time deposits and deposits more than $100,000.

M4 is as a broad measure of notes and coins in circulation (M0) + bank accounts.

In the United States, M1, M2, M3 are published every week on Thursdays at 4:30 pm EST (New York), reflecting the weekly change in the money supply. The most relevant for the United States is M2, which remains as one of the leading indicators index components calculated by Conference Board.

For the majority of European countries, the M3 money supply is traditionally the most significant, while for Great Britain it is M4.

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