Money supply - Financial definition
Concise definition of the term money supply
Money supply refers to the total amount of monetary assets available in an economy at a specific time, including cash, coins, and balances held in checking and savings accounts.
Comprehensive definition of the term money supply
The money supply encompasses all liquid assets within an economy that can be readily used for transactions and includes various categories such as M0 (physical currency), M1 (demand deposits and other liquid assets), and M2 (savings deposits and small time deposits). It is a crucial indicator used by economists and policymakers to gauge economic health, influence monetary policy, and manage inflation. For instance, central banks may alter the money supply through open market operations, changing reserve requirements, or adjusting interest rates to stabilize or stimulate the economy.