Federal Reserve Bank

Introduction

The term money supply is just what it sounds like; the total amount of money in our economic system. More specifically, money supply includes all electronically held deposit balances within any banking institutions account plus all coins and bills that are in circulation. To get more detailed, the federal reserve has created different classes of money to measure outstanding money. There are four classes; M0, M1, M2, and M3 and they are primarily segregated by levels of liquidity.

M0 represents all of the physical cash and coins in public circulation plus any accounts held at central banks which can be exchanged for cash.

M1 includes M0 plus any balances that are in checking accounts or any other demand accounts (accounts that allow you to exchange for cash