1. What is Money Supply M1?

Money Supply M1 is the most liquid measure of the money supply, including physical currency in circulation and demand deposits (checking accounts). It represents money that can be spent immediately.

2. How Does the Calculator Work?

The calculator uses the M1 money supply formula:

Where:

• \( Currency \) — Physical money in circulation (coins and banknotes)
• \( Demand\ Deposits \) — Funds in checking accounts that can be withdrawn on demand

Explanation: M1 represents the most liquid forms of money that are immediately available for transactions and spending.

3. Importance of M1 Calculation

Details: M1 is a key economic indicator used by central banks to monitor monetary policy effectiveness, control inflation, and assess economic liquidity. It helps in understanding the immediate purchasing power in an economy.

4. Using the Calculator

Tips: Enter currency amount and demand deposits in the same currency units. Both values must be non-negative numbers representing the total amounts in the economy.

5. Frequently Asked Questions (FAQ)

Q1: What is included in M1 money supply?
A: M1 includes physical currency (coins and banknotes) in circulation plus demand deposits (checking accounts) and other checkable deposits.

Q2: How does M1 differ from M2 and M3?
A: M2 includes M1 plus savings deposits, money market securities, and small time deposits. M3 includes M2 plus large time deposits and institutional money market funds.

Q3: Why is M1 important for monetary policy?
A: Central banks monitor M1 growth to control inflation and ensure economic stability. Rapid M1 growth may indicate potential inflation, while slow growth may signal economic contraction.

Q4: What factors affect M1 money supply?
A: Central bank policies, commercial bank lending, public demand for cash, and economic conditions all influence M1 levels.

Q5: How often is M1 measured and reported?
A: Most central banks report M1 statistics weekly or monthly, providing regular updates on money supply changes.