Austrian Economics Wiki

Money supply or money stock is the total amount of money available in an economy at a particular point in time.[1]

Changes in the money supply[]

An increase in the money is called inflation[2], while a contraction or decrease is called deflation.[3]

Main article: Inflation
Main article: Deflation

Monetary aggregates[]

There is a number of monetary aggregates to measure and interpret the money supply.


According to the Bank of England, M0 or "narrow money" is composed of notes and coin in circulation outside the Bank of England, and banks’ operational deposits with the Bank of England. It is not published by this bank since 2006,[4] but other banks continue using variants of it.[citation needed]


According to the European Central Bank, M1 is defined as currency in circulation plus overnight deposits.[5]

The Federal Reserve defines M1 as the sum of currency held outside the vaults of depository institutions, Federal Reserve Banks, and the U.S. Treasury; travelers checks; and demand and other checkable deposits issued by financial institutions (except demand deposits due to the Treasury and depository institutions), minus cash items in process of collection and Federal Reserve float.[6]


According to the ECB, M2 comprises M1 plus deposits with an agreed maturity of up to and including two years and deposits redeemable at notice of up to and including three months.[5]

The Fed defines M2 as M1 plus savings deposits (including money market deposit accounts) and small-denomination (under $100,000) time deposits issued by financial institutions; and shares in retail money market mutual funds (funds with initial investments under $50,000), net of retirement accounts.[6]


For the ECB, M3 comprises M2 plus repurchase agreements, money market fund shares and units as well as debt securities with a maturity of up to and including two years.[5]

For the Fed, M3 is M2 plus large-denomination ($100,000 or more) time deposits; repurchase agreements issued by depository institutions; Eurodollar deposits, specifically, dollar-denominated deposits due to nonbank U.S. addresses held at foreign offices of U.S. banks worldwide and all banking offices in Canada and the United Kingdom; and institutional money market mutual funds (funds with initial investments of $50,000 or more).[6]


The MZM used by the Fed ("money, zero maturity") is M2 minus small-denomination time deposits, plus institutional money market mutual funds (that is, those included in M3 but excluded from M2).[6]


  1. Paul M. Johnson. "Money stock", from "A Glossary of Political Economy Terms".
  2. Henry Hazlitt. "What You Should Know About Inflation", Mises Institute, referenced 2010-10-0.
  3. Murray N. Rothbard. "C. Secondary Developments of the Business Cycle", Man, Economy and State, referenced 2010-03-09.
  4. Bank of England. "Explanatory Notes - M0", referenced 2010-10-06.
  5. 5.0 5.1 5.2 The European Central Bank. "Monetary aggregates". Referenced 2010-10-05.
  6. 6.0 6.1 6.2 6.3 Research Division of the Federal Reserve Bank of St. Louis. "Definitions" (pdf) from Monetary trends. Referenced 2010-10-06.

External links[]