An outline of the money supply and the monetary aggregates

1. The Money
Supply

2. What is the Money
Supply?
• The money supply is the
total stock of money
available in an economy at a
particular point in time.

3. • There are different
definitions of the money
supply.

4. 1. The Monetary Base (M0)
• This is the total amount of
cash in the economy i.e.
notes and coins in circulation
and notes and coins held by
the central bank.

5. 2. Narrow Money (M1)
• This comprises M0 and all
checkable deposits or
money in short term savings
as well as traveller's
cheques.

6. • This is money which is
available immediately for
spending and therefore
fulfils the medium of
exchange function of
money.

7. 3. Broad Money (M2)
• This includes M1 plus long
term deposits held at
financial institutions.
• This monetary aggregate
fulfils the store of value
function.