Interest Rate Determination

Money Supply Measures

LEARNING OBJECTIVE

1. Learn the various definitions of money supply and their approximate values in the U.S. economy.

In the United States, the Federal Reserve Bank (or "Federal Reserve," and more informally, "the Fed") reports several distinct measures of the aggregate money supply. The narrowest measure, M1, includes only the most liquid assets. Higher numbers following an "M" reflect broader measures of money that include less liquid assets. Below is a description of M1–M3. However, unless otherwise specified, all later references to the money supply will relate to the M1 definition.