The Money Supply: Measuring M1 & M2

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“Money” actually includes various forms of payment—not just coins, bills, credit, and checks. This DataPost tutorial walks through the various types of payment that contribute to our notion of “money” in the United States.

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The Money Supply: Measuring M1 & M2

  1. 1. DataPost The Money Supply Measuring M1 & M2 Federal Reserve Bank of San Francisco Education & Outreach Date last updated: September 18, 2017
  2. 2. Money Supply – Did You Know? DataPost As a share of the total values shown above, M1 dropped from 26% in 1980 to 20% in 2010.1 Used •By households and businesses •To make payments and to be held as short-term investments Components •M1 = coin and currency in circulation, plus checking accounts •M2 = M1 plus short-term liquid assets Context •The Fed uses M1 and M2 as a standardized way of defining money in the economy $1.54 $3.22 $4.77 $8.59 $0 $2 $4 $6 $8 $10 $12 1980 1990 2000 2010 M1 and M2 ($trillions, non-seasonally adjusted) M2-M1 M1 Source: Federal Reserve Board 1. See PowerPoint file for technical note. www.frbsf.org/education/teacher-resources/datapost FRBSF Education & Outreach
  3. 3. Money Supply – Components • Savings Deposits • Time Deposits • Certain CDs • Money Market Deposit Accounts • Money Market Mutual Funds • Includes M1 M2 • Coin • Currency • Demand Deposits • Travelers Checks M1 $3.56 $3.56 $10.09 $0 $2 $4 $6 $8 $10 $12 $14 M1 M2 M2-M1 M1 DataPost August 2017 ($trillions, seasonally adjusted) Source: Federal Reserve Board www.frbsf.org/education/teacher-resources/datapost FRBSF Education & Outreach
  4. 4. $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 $9,000 $10,000 Traveler's Checks, $2 Other Checkable Deposits, $573 Demand Deposits, $1,491 Currency and Coins, $1,495 Retail Money Market Funds, $690 Small-Denomination Time Deposits, $372 Savings Deposits, $9,025 M2 in Detail August 2017 ($billions, seasonally adjusted) DataPost M1 components of M2 Source: Federal Reserve Board 9/14/17 data release Note: Components may not add to totals due to rounding www.frbsf.org/education/teacher-resources/datapost FRBSF Education & Outreach
  5. 5. $0 $2 $4 $6 $8 $10 $12 $14 1980 1985 1990 1995 2000 2005 2010 2015 M2-M1 M1 M2 DataPost Source: Federal Reserve Board 9/14/17 data release Trends — M1 and M2 Jan. 1980 to Aug. 2017 ($trillions, seasonally adjusted) M1 www.frbsf.org/education/teacher-resources/datapost FRBSF Education & Outreach
  6. 6. What Do You Think? 1. How much cash (coin + currency) do you currently have in your pocket, wallet, or purse? Is this cash part of M1 or M2? 2. Do you have a checking account? Is the balance in your checking account part of M1? 3. Do you have a savings account? Is your savings account balance part of M1? 4. How would you describe the trends of M1 and M2 since 1980? (See slide 5) DataPost www.frbsf.org/education/teacher-resources/datapost FRBSF Education & Outreach

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