Money Supply

Money Supply refers to the total amount of monetary Assets available in an economy at a specific time. It includes various forms of Money, such as cash, coins, and balances held in Checking and Savings Accounts. The Money supply is typically categorized into different measures, such as M1 and M2.

Examples:

• M1: This includes physical currency (coins and paper Money) and Demand Deposits (Checking accounts) that can be quickly accessed for transactions.
• M2: This encompasses M1 plus Savings Accounts, time deposits, and other near-Money Assets that can be converted to cash with some effort.

Cases:

• During economic expansion, the Central Bank may increase the Money supply to encourage borrowing and spending.
• In a recession, reducing the Money supply can help control inflation, as there is less Money available for spending.