What Is Money? 

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How Is Money Measured?

But exactly how much money is out there, and what forms does it take? Economists and investors ask this question to determine whether there is inflation or deflation. Money is separated into three categories so that it is more discernible for measurement purposes:

  • M1 – This category of money includes all physical denominations of coins and currency; demand deposits, which are checking accounts and NOW accounts; and travelers' checks. This category of money is the narrowest of the three, and is essentially the money used to buy things and make payments (see the "active money" section below).
  • M2 – With broader criteria, this category adds all the money found in M1 to all time-related deposits, savings accounts deposits, and non-institutional money market funds. This category represents money that can be readily transferred into cash.
  • M3 – The broadest class of money, M3 combines all money found in the M2 definition and adds to it all large time deposits, institutional money market funds, short-term repurchase agreements, along with other larger liquid assets.
    Active Money
    The M1 category includes what's known as active money—the total value of coins and paper currency in circulation. The amount of active money fluctuates seasonally, monthly, weekly, and daily. In the United States, Federal Reserve Banks distribute new currency for the U.S. Treasury Department. Banks lend money out to customers, which becomes active money once it is actively circulated.
  Wednesday, December 23, 2020 at 10:26:35 AM
Posts: 450

Joined: 8/8/2020
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I value the article.Thanks Again. Fantastic. money
  Wednesday, December 23, 2020 at 10:32:46 AM

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