We are independent & ad-supported. We may earn a commission for purchases made through our links.

Advertiser Disclosure

Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.

How We Make Money

We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently from our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.

What is M2 Money Supply?

John Lister
By
Updated May 16, 2024
Our promise to you
SmartCapitalMind is dedicated to creating trustworthy, high-quality content that always prioritizes transparency, integrity, and inclusivity above all else. Our ensure that our content creation and review process includes rigorous fact-checking, evidence-based, and continual updates to ensure accuracy and reliability.

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

Editorial Standards

At SmartCapitalMind, we are committed to creating content that you can trust. Our editorial process is designed to ensure that every piece of content we publish is accurate, reliable, and informative.

Our team of experienced writers and editors follows a strict set of guidelines to ensure the highest quality content. We conduct thorough research, fact-check all information, and rely on credible sources to back up our claims. Our content is reviewed by subject matter experts to ensure accuracy and clarity.

We believe in transparency and maintain editorial independence from our advertisers. Our team does not receive direct compensation from advertisers, allowing us to create unbiased content that prioritizes your interests.

The M2 money supply is a particular method of measuring how much money exists within a country's economy. In the United States, the M2 money supply is the broadest definition currently used for official figures. Tracking the figure is of particular interest to those economists who believe controlling the supply of money is an effective way to influence the economy.

The precise definitions of monetary supply measures can vary from country to country. This means it is usually only possible to fairly compare figures from one country, on a historical basis, rather than from country to country. The general principles of the definitions are the same in each system; the higher the M number, the more factors are taken into account.

Within the United States, the narrowest definition is M0, which covers all physical notes and coins, plus the deposits that banks themselves have placed in the Federal Reserve and could demand to exchange for cash. M1 adds in the money that is deposited into checking accounts and could thus theoretically be accessed immediately. In reality this couldn't happen, as the banks don't hold enough cash to cope with everyone withdrawing their cash at once.

M2 money supply adds in most money that savers and investors could access in a relatively short time with little or no costs or penalties. This includes savings accounts and money market accounts. It also includes certificates of deposit for less than $100,000. These are included as in most cases the time before the certificate can be cashed in without penalty is lower, or the penalty for early cashing in is lower, than with the majority of investments.

Until 2005, the Federal Reserve also kept track of M3. This adds in all other forms of certificates of deposit, plus a limited range of financial products involving securities or foreign currency. The Federal Reserve decided this measure didn't add enough useful information to make it worth calculating.

The M2 money supply is most closely followed by supporters of monetary policy. These are economists that believe measures that control the availability of money and credit are the best ways to control the economy. This includes techniques, such as setting interest rates in an attempt to influence inflation and employment levels. This is in contrast to fiscal policy that concentrates more on government spending and taxation designed to stimulate demand for products and services through a self-perpetuating cycle of government spending being used to create jobs so that enough people have the spending power to create demand satisfied by private enterprise.

SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
John Lister
By John Lister , Former Writer
John Lister, an experienced freelance writer, excels in crafting compelling copy, web content, articles, and more. With a relevant degree, John brings a keen eye for detail, a strong understanding of content strategy, and an ability to adapt to different writing styles and formats to ensure that his work meets the highest standards.

Discussion Comments

John Lister

John Lister

Former Writer

John Lister, an experienced freelance writer, excels in crafting compelling copy, web content, articles, and more. With...
Learn more
SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.

SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.