The Supply of money
The Supply of
money:
The money supply that will
focus on has a
narrow definition called M1 and
alternative board definition called M2. The narrow
definition M1 consists of currency paper money and coins hands of the non-bank public, plus checkable deposits in
commercial banks and other depository institutions such
as saving and
loan associations. The broader definition adds
money market funds, saving deposits
and small- denomination time deposits to
M1.
The narrow
set of liquid asset
in M1 has two
characteristics that separate them
from other assets
in the economy: they are
the generate accepted means of
payment, and they earn
little or no
interest . The growth of
money market funds has blurred
the distinction between M1 and
M2.
The instruments
of monetary policy:
The Fed controls
the level of the
money supply first
by setting reserve
requirements against deposits. And
then by changing the
amount of reserves it. Supplies, both on its
own initiative and on the
initiative of the banksRead More...
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