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Measuring the money supply

Measuring the money supply To measure the money supply, we sum up assets to the far right of the liquidity spectrum Most Liquid Non-money assets money M1 M1 includes: Currency in circulation Demand deposits at commercial banks Travelers’ checks

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Measuring the money supply

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  1. Measuring the money supply To measurethe moneysupply, we sum upassets to the far rightof the liquidity spectrum MostLiquid Non-money assets money

  2. M1 M1 includes: • Currency in circulation • Demand deposits at commercial banks • Travelers’ checks • Other checkable deposits including NOW accounts, ATS accounts, and checkable deposits at credit unions and mutual savings banks

  3. M2 M2 includes M1 plus • Savings deposits • Small time deposits (less than $100,000) • Retail money market mutual fund balances

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