Money in terms of liquidity.Liquidity: the extent to which an ASSET can be quickly and completely converted into CURRENCY (notes and coin) in order to be used as a means of payment. Monetary assets are the most liquid since they are widely acceptable as a medium of exchange, while durable and highly specific assets, such as a machine, are the least liquid since such assets can be converted into money only after a willing buyer has been found and a money value placed on the asset.
What Is the Money Supply, and How Does It Affect the Economy?The money supply as defined by the Federal Reserve, the nation's central bank, is very narrowly defined. It includes cash, checks and savings held at banks. However, when many people speak of the money supply, they are referring to all forms of cash, credit and wealth that can be used to purchase goods and services, including investments. In recent years, credit has become the most important component of the money supply, far outweighing any cash on hand or savings in the bank.How Is the Official Money Supply Measured?The Federal Reserve, has two main measurements of the U.S. money supply. The Fed reports on these measures every week. They are M1, which is the most liquid form of money and M2, which is a little more difficult to spend. Specifically:
M1 includes currency, travelers checks, and checking account deposits. It also includes those checking accounts that pay interest, even though many people use them as savings accounts.
M2 includes everything in M1 plus savings accounts, time deposits under $100,000, and money market mutual funds (except those held in IRAs).
Neither M1 nor M2 measures the amount of money invested in stock or bond funds, which most people now use for investments rather than just savings accounts. In fact, during the 1990s money supply as measured by M2 fell as people took money out of low-interest bearing savings account and invested in the stock market. In fact, then-Federal Reserve Chairman Alan Greenspan said that, if the economy were dependent on the M2 money supply for growth, it would be in a recession.
Money has been used by civilized societies for millennia, but in its modern macroeconomic context it is identified with “the money supply.” Almost all economies have moved beyond commodity money to paper money; however in economies with reliable banks, most money takes the form of bank deposits. To the extent that they are transferable by check, bank deposits satisfy the official definition of money as “a generally acceptable means of payment.”Economists define acountry’s money supply along a spectrum ranging from high to low liquidity: the ease with which an asset can be used as a generally acceptable means of payment, or at least converted into a means of payment. Various monies can range along a spectrum from coin and paper currency (“cash”), called M0; to M1, which is M0 plus checkable bank deposits; to M2, which is M1 plus savings and other similar short-term but noncheckable deposits; to M3, which includes longer-term deposits; and so on. The precise definitions vary from country to country.
Groups of money liquidity
Stephanie Powers "Monetary Policy"
Money in terms of liquidity.Liquidity: the extent to which an ASSET can be quickly and completely converted into CURRENCY (notes and coin) in order to be used as a means of payment. Monetary assets are the most liquid since they are widely acceptable as a medium of exchange, while durable and highly specific assets, such as a machine, are the least liquid since such assets can be converted into money only after a willing buyer has been found and a money value placed on the asset.
Collins Dictionary of Economics, s.v. "liquidity," accessed April 13, 2012, http://www.credoreference.com.ezproxy.ardc.talonline.ca/entry/collinsecon/liquidity
What Is the Money Supply, and How Does It Affect the Economy?The money supply as defined by the Federal Reserve, the nation's central bank, is very narrowly defined. It includes cash, checks and savings held at banks. However, when many people speak of the money supply, they are referring to all forms of cash, credit and wealth that can be used to purchase goods and services, including investments. In recent years, credit has become the most important component of the money supply, far outweighing any cash on hand or savings in the bank.How Is the Official Money Supply Measured?The Federal Reserve, has two main measurements of the U.S. money supply. The Fed reports on these measures every week. They are M1, which is the most liquid form of money and M2, which is a little more difficult to spend. Specifically:M1 includes currency, travelers checks, and checking account deposits. It also includes those checking accounts that pay interest, even though many people use them as savings accounts.
M2 includes everything in M1 plus savings accounts, time deposits under $100,000, and money market mutual funds (except those held in IRAs).
Neither M1 nor M2 measures the amount of money invested in stock or bond funds, which most people now use for investments rather than just savings accounts. In fact, during the 1990s money supply as measured by M2 fell as people took money out of low-interest bearing savings account and invested in the stock market. In fact, then-Federal Reserve Chairman Alan Greenspan said that, if the economy were dependent on the M2 money supply for growth, it would be in a recession.
K. Amadeo, “What Is the Money Supply, and How Does It Affect the Economy?,” About.com, accessed April 13, 2012, http://useconomy.about.com/od/monetarypolicy/f/money_supply.htm
Money has been used by civilized societies for millennia, but in its modern macroeconomic context it is identified with “the money supply.” Almost all economies have moved beyond commodity money to paper money; however in economies with reliable banks, most money takes the form of bank deposits. To the extent that they are transferable by check, bank deposits satisfy the official definition of money as “a generally acceptable means of payment.”Economists define acountry’s money supply along a spectrum ranging from high to low liquidity: the ease with which an asset can be used as a generally acceptable means of payment, or at least converted into a means of payment. Various monies can range along a spectrum from coin and paper currency (“cash”), called M0; to M1, which is M0 plus checkable bank deposits; to M2, which is M1 plus savings and other similar short-term but noncheckable deposits; to M3, which includes longer-term deposits; and so on. The precise definitions vary from country to country.The Princeton Encyclopedia of the World Economy, s.v. "money supply," accessed April 13, 2012, http://www.credoreference.com.ezproxy.ardc.talonline.ca/entry/prewe/money_supplyBottom of Form