M1

(noun)

The amount of cash in circulation plus the amount in bank checking accounts.

Examples of M1 in the following topics:

  • Measuring the Money Supply: M1

    • A broader measure of money than M1 includes not only all of the spendable balances in M1, but certain additional assets termed "near monies".
    • The M1 money supply increases by $810 when the loan is made (M1=$1,710).
    • The total M1 money supply didn't change; it includes the $400 check and the $500 left in the checking account (M1=$1,710).
    • M1 and her checking account do not change, because the check is never cashed (M1=$1,710).
    • This creates promise-to-pay money from a previous promise-to-pay, inflating the M1 money supply (M1=$2,439).

  • Measuring the Money Supply: M2

    • M2 is a broader measure of the money supply than M1, including all M1 monies and those that could be quickly converted to liquid forms.
    • M2 consists of all the liquid components of M1 plus near-monies.
    • Near monies are relatively liquid financial assets that may be readily converted into M1 money.
    • This would cause M1 to decrease by $1,000, but M2 to stay the same.
    • The M2 aggregate includes M1 plus near-monies.

  • Other Measurements of the Money Supply

    • In addition to the commonly used M1 and M2 aggregates, several other measures of the money supply are used as well.
    • In addition to the commonly used M1 and M2 aggregates, there are several other measurements of the money supply that are used as well .
    • M1: The total amount of M0 (cash/coin) outside of the private banking system plus the amount of demand deposits, travelers checks and other checkable deposits.
    • M2: M1 + most savings accounts, money market accounts, retail money market mutual funds, and small denomination time deposits (certificates of deposit of under $100,000).
    • This new type of money is what makes up the non-M0 components in the M1-M3 statistics.