The amount of money in the economy. Measures of money supply usually include cash in circulation and current account deposits in banks, but may also include savings deposits or time-restricted deposits. There are three measures of money supply: M1, M2, and M3.

What money supply tells us?

The money supply is the total amount of money—cash, coins, and balances in bank accounts—in circulation. For example, U.S. currency and balances held in checking accounts and savings accounts are included in many measures of the money supply.

What is the meaning of the money supply?

Let us first understand the meaning of money supply or monetary supply. Simply put, the money supply is the total stock of money that is in circulation in an economy on any specific day. This includes all the notes, coins and demand deposits held by the public on such a day. Such as money demand, money supply is also a stock variable

Which is a stock variable in money supply?

This includes all the notes, coins and demand deposits held by the public on such a day. Such as money demand, money supply is also a stock variable One important point to note is that the stock of money kept with the government, central bank, etc. is not taken into account in money supply.

Which is the main source of money in an economy?

It should be noted that ‘money supply’ which refers to the total stock of domestic means of payment owned by the ‘public’ in a country, we consider the stock of money in spendable form only to be the main source of money supply.

How is the supply of money in an economy controlled?

The supply of money in an economy is controlled by its central bank, for example, Fed in the US. The Fed may change the money supply by using open market operations or by changing reserve requirements. The demand and supply curve for money can be represented as follows: As you can see, the money supply curve is completely inelastic.