What does M2 equal?

M1 and M2 are two of the most widely recognized definitions for measuring money supply in an economy. These classifications help economists and policymakers understand the availability and velocity of money circulating within the system.

M1, also known as the narrow money supply, comprises several components that are highly liquid and easily accessible for spending. It includes coins and currency in circulation, which are physical forms of money, as well as checkable (demand) deposits held in banks that can be withdrawn or transferred instantly.

Traveler's checks and saving deposits are also included in the M1 definition. Traveler's checks offer a convenient and secure way to carry money while traveling, while saving deposits are funds held in savings accounts that can be accessed relatively quickly.

M2, on the other hand, represents a broader measure of the money supply. It includes all the components of M1, but also extends to include less liquid assets that can be converted into cash within a short period. Money market funds, certificates of deposit, and other time deposits are examples of assets that are part of the M2 definition.

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