M2 - Broad Money
Last updated
Was this helpful?
Last updated
Was this helpful?
M2, in terms of the money supply, is a broader and more inclusive measure than , encompassing a wider range of financial assets and savings instruments. M2 is often referred to as "broad money" and includes not only the components of but also additional forms of near-money or less liquid assets that can be converted into cash relatively quickly. M2 provides a more comprehensive view of the money supply within an economy.
Key components of M2 typically include:
: M2 includes all the components of M1, which consist of physical currency (coins and paper money), demand deposits (checking accounts), and other checkable deposits.
Savings Accounts: M2 incorporates various types of savings accounts offered by banks and financial institutions. These accounts typically pay interest on deposited funds and may have withdrawal restrictions or transaction limits.
Time Deposits (Certificates of Deposit - CDs): M2 includes time deposits, such as certificates of deposit (CDs), which are savings instruments with fixed maturity dates and interest rates. CDs are less liquid than demand deposits, as they usually require holding the deposit until the maturity date to avoid penalties.
Money Market Mutual Funds (MMMFs): M2 may include money market mutual funds, which are investment vehicles that invest in short-term, highly liquid securities, such as government and corporate debt. While not as liquid as demand deposits, MMMFs can be readily converted into cash or used for payments.
Retail Money Market Deposits: Some retail money market deposit accounts, often available at banks, are included in M2. These accounts combine features of savings and checking accounts and may have limited check-writing capabilities.
Small Time Deposits: M2 incorporates small time deposits, which are time deposits with lower denominations and shorter maturities compared to larger, institutional CDs.
M2 is a useful measure for assessing the overall availability of money in an economy, including not only the funds immediately available for transactions () but also those held in less liquid savings and investment accounts. It is closely monitored by central banks and policymakers to gauge the money supply's impact on economic conditions and to inform monetary policy decisions.
Be sure to to receive product and service updates from OpenBullion.