The money supply is the total stock of money available in an economy at a given time and can be defined in different ways. The monetary base (M0) comprises cash in circulation and central bank reserves. Narrow money (M1) includes M0 as well as checkable deposits and some savings. Broad money (M2) contains M1 plus long-term savings deposits, capturing money fulfilling both medium of exchange and store of value functions.

1. The Money
Supply

2. What is the Money
Supply?
• The money supply is the
total stock of money
available in an economy at a
particular point in time.

3. • There are different
definitions of the money
supply.

4. 1. The Monetary Base (M0)
• This is the total amount of
cash in the economy i.e.
notes and coins in circulation
and notes and coins held by
the central bank.

5. 2. Narrow Money (M1)
• This comprises M0 and all
checkable deposits or
money in short term savings
as well as traveller's
cheques.

6. • This is money which is
available immediately for
spending and therefore
fulfils the medium of
exchange function of
money.

7. 3. Broad Money (M2)
• This includes M1 plus long
term deposits held at
financial institutions.
• This monetary aggregate
fulfils the store of value
function.