### What is M1 vs M2?

## What is M1 vs M2?

What is M2? M2 is a calculation of the money supply that includes all elements of M1 as well as “near money.” M1 includes cash and checking deposits, while near money refers to savings deposits, money market securities, mutual funds, and other time deposits.

**How do you calculate the M1 Money Multiplier?**

Given the following, calculate the M1 money multiplier using the formula m 1 = 1 + (C/D)/[rr + (ER/D) + (C/D)]. Once you have m, plug it into the formula ΔMS = m × ΔMB. So if m 1 = 2.6316 and the monetary base increases by $100,000, the money supply will increase by $263,160.

**What is the equation for money multiplier?**

The formula for the money multiplier is simply 1/r, where r = the reserve ratio. A little too easy, right? It’s the reciprocal of the reserve ratio. When r is the reserve ratio for all banks in an economy, then each dollar of reserves creates 1/r dollars of money in the money supply.

### What is the formula for money supply?

ER = excess reserves = R – RR. M1 = money supply = C + D. MB = monetary base = R + C.

**What is not included in M1?**

M1 is a narrow measure of the money supply that includes physical currency, demand deposits, traveler’s checks, and other checkable deposits. M1 does not include financial assets, such as savings accounts and bonds.

**Why is M1 narrow money?**

Understanding Narrow Money The name is derived from the fact that M1/M0 are the narrowest or most restrictive forms of money that are the basis for the medium of exchange within an economy. This category of money is considered to be the most readily available for transactions and commerce.

#### What is the relationship between M1 and M2 money?

Figure 1. The Relationship between M1 and M2 Money. M1 and M2 money have several definitions, ranging from narrow to broad. M1 = coins and currency in circulation + checkable (demand) deposit + traveler’s checks. M2 = M1 + savings deposits + money market funds + certificates of deposit + other time deposits.

**Are there any equations you need to know for mechanics M1?**

There aren’t really that many equations in M1 that you can learn and use, it’s more about whether you’re secure in knowing how they all fit together and relate. That said, the ones you have there are most of them… others I can think of are: Rep: ?

**How is the M1 money supply multiplier calculated?**

You cannot use the more complex M1 money multiplier this week because of the Fed’s computer glitch, so you should use the simple deposit multiplier from Chapter 14 “The Money Supply Process”: ΔD = (1/rr) × ΔR. The equation provides an upper-bound estimate for changes in deposits.

## What’s the difference between M1, M2, and M3?

Up until March 2006, the Federal Reserve published reports on three money aggregates: M1, M2, and M3. Since 2006, the Fed no longer publishes M3 data. 2 M1 covers types of money commonly used for payment, which includes the most basic payment form, currency, which is also referred to as M0.

What is M1 vs M2? What is M2? M2 is a calculation of the money supply that includes all elements of M1 as well as “near money.” M1 includes cash and checking deposits, while near money refers to savings deposits, money market securities, mutual funds, and other time deposits. How do you calculate the M1…