A component of money supply that consists of highly liquid forms of money: coins and currency (banknotes, and other digital entries of money), demand deposits, and other liquid assets held by a country’s central bank. In specific countries (e.g., the United States), narrow money is classified as M1 (M0 + demand deposits).
M1 is expressed as a seasonally adjusted index on which a base year is used for the sake of compiling a historical perspective (e.g., 2010=100).
This measure of money supply is based on the so-called “medium of exchange” function of money.
It is also known as a most narrowly defined measure of the money supply.
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