Money supply

The total quantity of money available in an economy at a given time. Measures such as M1 and M2 differ in which assets they count.

M1: A monetary aggregate that counts currency and highly liquid balances, with its exact definition varying by country and period. It captures the narrowest commonly reported measure of money in the United States.
Fractional-reserve banking: A banking system in which institutions hold only part of deposit liabilities as reserves and lend or invest the rest. Bank lending can create deposits that increase measured money.
Monetary policy: Central-bank actions that influence interest rates, credit conditions, and the supply of money. Authorities monitor monetary quantities when assessing policy transmission and economic conditions.
Credit (finance): An arrangement in which one party provides funds or goods now in exchange for repayment later. Credit can expand alongside money, but outstanding credit is not itself all counted as money.
M2: A monetary aggregate that includes M1 and selected savings deposits and other near-money assets. It extends the money supply beyond balances used directly for payment.
Money multiplier: A model describing how a change in base money may support a larger change in bank deposits and broader money. It represents one channel linking reserves to broad money, though the relationship is not fixed.
Inflation: A sustained increase in the general price level, reducing the purchasing power of money. Changes in money growth can affect prices, though the relationship depends on output and money demand.
Debt: An obligation to repay borrowed money or fulfill another financial commitment. Debt records liabilities, whereas money supply measures selected liquid assets.
Monetary aggregate: A statistical measure grouping financial assets according to their degree of liquidity. Money supply estimates depend on which aggregate an authority chooses.
Monetary base: Currency in circulation plus commercial banks’ reserve balances at the central bank. It is a narrower quantity that central banks can influence more directly than broad money.

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