M0, M1, M2, M3, and M4 are classifications of the money supply in an economy, categorized by liquidity—how quickly assets can be turned into cash. M0 is the most liquid (physical cash), while M4 is the broadest, including all money and near-money, like postal savings. These measures help central banks track money velocity, inflation, and economic stability.
The main components are M0 (currency in circulation + bank reserves), M1 (narrow money), M2 (M1 + savings deposits), M3 (M1 + time deposits), and M4 (M3 + post office deposits).
M1 represents the most liquid forms of money for immediate transactions, while M2 includes savings-like assets, M3 adds larger time deposits, and M4 encompasses a broader range of deposits.
Reserve Money (M0): It is also known as High-Powered Money, monetary base, base money etc. M0 = Currency in Circulation + Bankers' Deposits with RBI + Other deposits with RBI It is the monetary base of economy.
M1: currency in circulation plus bank current deposits from the private non-bank sector. M3: M1 plus all other bank deposits from the private non-bank sector, plus bank certificate of deposits, less inter-bank deposits.
United Kingdom Money Supply M4. In the United Kingdom, M4 comprises notes and coin in circulation with the public, together with all sterling deposits (including certificates of deposits) held with UK banks and building societies by the rest of the private sector.
M0: Physical cash + reserves. M1: M0 + checking deposits = immediately spendable money. M2: M1 + savings and small time deposits = money + near-money. M3: M2 + large and institutional deposits = broadest liquidity.
M2 is a measure of money supply, referring to a certain portion of the money contained in an economy. Economists use M followed by a number to designate certain portions of money supply.
We'll start by looking at "base money" (M0), which refers to physical currency created by the central bank. Then, we'll move on to broader definitions, such as M1 (which includes currency in circulation plus checkable deposits) and M2 (which includes M1 plus savings accounts and other easily convertible assets).
What is M2? M2 is a classification of money supply. It includes M1 – which is comprised of cash outside of the private banking system plus current account deposits – while also including capital in savings accounts, money market accounts and retail mutual funds, and time deposits of under $100,000.
decreasing order of liquidity: M1 is the most liquid, followed by M2, then M3, and finally M4 is the least liquid.
The smallest and most liquid measure, M0, is strictly currency in circulation plus commercial bank reserve balances at Federal Reserve Banks; M0 is often referred to as the "monetary base." M1 is defined as the sum of currency in circulation, demand deposits at commercial banks, and other liquid deposits; it is often ...
Money supply is measured and categorized on a scale from narrow to broad. Although the classification does vary depending on the country, it is typically classified through an “M” scale, where M0 includes the narrowest forms of the money supply, and M4 includes the broadest forms of the money supply.
Money Supply M0 in the United States averaged 1227132.13 USD Million from 1959 until 2025, reaching an all time high of 6413100.00 USD Million in December of 2021 and a record low of 48400.00 USD Million in February of 1961. source: Federal Reserve.
M2 money supply: a definition of the money supply that includes everything in M1, but also adds money market funds, and certificates of deposit.
M0 is the total amount of paper money and coins in circulation, plus the current amount of central bank reserves. M1 is the most frequently reported headline number. It is M0 plus money held in regular savings accounts and travelers' checks.
M1 money supply includes coins and currency in circulation—the coins and bills that circulate in an economy that are not held by the U.S. Treasury, at the Federal Reserve Bank, or in bank vaults. Closely related to currency are checkable deposits, also known as demand deposits.
Definition. Broad money (M3) reflects the overall supply of money in the economy, including various forms of liquid assets held by the public.
M0 (or Reserve Money) M1 (or Narrow Money) M2. M3 (or Broad Money)
M3 (or m³) has several meanings, most commonly the cubic meter, a unit of volume in the SI system used for measuring space (like gas or construction materials). In finance, M3 is a broad measure of the money supply (M2 plus large deposits). It also refers to Apple's M3 chips for Macs, the military's M3 submachine gun, or even a mental health screening tool.
M1, M2, M3, and M4 are monetary aggregates that measure a country's money supply, with each successive category including the previous one plus less liquid assets, moving from most liquid (M1, cash, checking) to broadest (M4, including large time deposits, commercial paper, etc.). M1 is currency & checking; M2 adds savings, small CDs; M3 includes M2 plus large time deposits & institutional funds (though the Fed stopped reporting M3 in 2006); M4 adds even broader assets like commercial paper and T-bills.
M3 includes M2 plus large time deposits, institutional money market funds, and other forms of less liquid assets. It is considered a broad measure of money supply. M4 includes M3 plus all other forms of deposits such as certificates of deposit and commercial paper. It is considered the broadest measure of money supply.
The Fed controls the supply of money by increas- ing or decreasing the monetary base. The monetary base is related to the size of the Fed's balance sheet; specifically, it is currency in circulation plus the deposit balances that depository institutions hold with the Federal Reserve.