Money Supply Calculator

Macroeconomic Money Supply Calculator (M0, M1, M2, and M3)

The Money Supply Calculator measures the total quantity of monetary assets available in an economy at a given point in time. Central banks and economists track money supply metrics (M0, M1, M2, M3) to understand liquidity, inflation expectations, credit availability, and central bank policy transmission.

Definitions of Money Supply Aggregates

Economists categorize money supply based on liquidity, ranging from physical cash to long-term financial assets:

• M0 (Monetary Base): The narrowest measure, consisting of physical currency in circulation plus commercial bank reserves held at the central bank. $$M_0 = \text{Currency} + \text{Bank Reserves}$$
• M1 (Narrow Money): Highly liquid assets ready for immediate spending, including physical currency and demand checking deposits. $$M_1 = \text{Currency} + \text{Demand Deposits} + \text{Checkable Deposits}$$
• M2 (Standard Money): M1 plus near-money assets such as savings accounts, small time deposits (CDs under $100,000), and retail money market mutual funds. $$M_2 = M_1 + \text{Savings Deposits} + \text{Small Time Deposits} + \text{Retail Money Market Funds}$$
• M3 (Broad Money): The broadest aggregate, combining M2 with large institutional time deposits, institutional money market funds, and short-term repurchase agreements. $$M_3 = M_2 + \text{Institutional Money Market Funds} + \text{Large Time Deposits}$$

Money Multiplier and Central Bank Policy

Through fractional reserve banking, commercial banks create additional deposit money when extending loans. The relationship between the monetary base ($M_0$) and money supply ($M_1$ or $M_2$) is expressed by the Money Multiplier ($m$):

$$m = \frac{M_2}{M_0}$$