What is Money Supply?
The money supply is the entire stock of currency and other liquid instruments circulating in a country’s economy as of a particular time. The money supply can include cash, coins, and balances held in checking and savings accounts, and other near money substitutes. Economists analyze the money supply as a key variable to understanding the macroeconomy and guiding macroeconomic policy.
- Money Supply is the total quantity of money in circulation at a point in time.
- Changes in the money supply are closely watched because of the relationship between money and macro economic variables such as inflation.
- The money supply can be measured in a various ways using narrower or broader definitions of which classes of financial assets are considered to be money.
Understanding Money Supply
Economists analyze the money supply and develop policies revolving around it through controlling interest rates and increasing or decreasing