azn d asked in Social ScienceEconomics · 1 decade ago

What is M1,M2, and M3 - Economic?

what is M1,M2, and M3 and Major components of M1 and M2

please explain

thank you

7 Answers

  • Connie
    Lv 6
    1 decade ago
    Favorite Answer

    M1 = cash and checking account deposits

    M2 = M1 + savings accounts & money market accounts

    M3 = M2 +large deposits and other large, long-term deposits.

    Quote from wiki:

    M0: Physical currency. A measure of the money supply which combines any liquid or cash assets held within a central bank and the amount of physical currency circulating in the economy. M0 (M-zero) is the most liquid measure of the money supply. It only includes cash or assets that could quickly be converted into currency. This measure is known as narrow money because it is the smallest measure of the money supply.[6]

    M1: M0 + demand deposits, which are checking accounts. This is used as a measurement for economists trying to quantify the amount of money in circulation. The M1 is a very liquid measure of the money supply, as it contains cash and assets that can quickly be converted to currency.[7]

    M2: M1 + small time deposits (less than $100,000), savings deposits, and non-institutional money-market funds. M2 is a broader classification of money than M1. Economists use M2 when looking to quantify the amount of money in circulation and trying to explain different economic monetary conditions.[8] M2 is a key economic indicator used to forecast inflation.[9]

    M3: M2 + all large time deposits, institutional money-market funds, short-term repurchase agreements, along with other larger liquid assets. The broadest measure of money; it is used by economists to estimate the entire supply of money within an economy.[10]


    quote from Conspiracy Nation:

    M1 is basically a measure of all currency in circulation and not in the vaults of the U.S. Treasury, “Federal” Reserve Banks, and the vaults of depository institutions.

    M2 is a refinement of M1. It is a slightly less liquid measure, consisting of M1 plus savings deposits, basically.

    M3 is a refinement of M2. Again, the liquidity is less. M3 consists of M2 plus larger denomination institutional deposits in money market funds, for example.

    Since the root source of inflation has been defined as the creation of dollars (increased supply, see “The Squeeze of ‘79”, op. cit.), it is to be marveled at that the M1, M2, and M3 statistics are rarely even mentioned in the various news outlets. When the talk is of inflation, there is an aura of “a complex and mysterious world.” (“The Squeeze of ‘79”, op. cit.) Inflation is not something magical that just happens. It has a root source.

  • 3 years ago

    M1 Money Supply

  • zeitz
    Lv 4
    3 years ago

    M1 And M2

  • Anonymous
    4 years ago

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    What is M1,M2, and M3 - Economic?

    what is M1,M2, and M3 and Major components of M1 and M2

    please explain

    thank you

    Source(s): m1 m2 m3 economic:
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    4 years ago

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