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Btec Business Level 3 Unit 25 M1

Satisfactory Essays

A measure of the money supply which combines any liquid or cash assets held within a central bank and the amount of physical currency circulating in the economy. The money supply is divided into two distinct categories: M1—assets that can be easily accessed and immediately used to purchase goods and service. These are referred to as liquid assets. Money deposited in checking accounts meets this criteria because checks represent demand deposits, as they are paid “on demand” for the cash in the account. This is money which is available immediately for spending and therefore fulfills the medium of exchange function of money. M2—all of M1 and assets that cannot be used directly as cash but can be easily be converted to cash. This monetary aggregate

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