M2

Examples of M2 in the following topics:

• Measuring the Money Supply: M2

  • M2 is one of the aggregates by which the Federal Reserve measures the money supply .
  • M2 consists of all the liquid components of M1 plus near-monies.
  • This would cause M1 to decrease by $1,000, but M2 to stay the same.
  • This is because M2 includes the money market account in addition to all the money counted in M1.
  • 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 .
  • 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).
  • M3: M2 + all other certificates of deposit (large time deposits, institutional money market mutual fund balances), deposits of eurodollars and repurchase agreements.
  • It is M2 – time deposits + money market funds.

• Measuring the Money Supply: M1

  • The Federal Reserve measures the money supply using three main monetary aggregates: M1, M2, and M3.
  • The broader category of money that embraces all of these assets is called M2.
  • M3 encompassed M2 plus relatively less liquid near monies.