What are examples of M2 money?

The concept of money supply is crucial in understanding the economic landscape. It refers to the total amount of money available in an economy at a given time. There are two primary categories of money supply: M1 and M2.

On the other hand, M2 money supply provides a broader perspective on the economy's financial health. It includes assets that individuals and businesses may not have immediate access to but can still be converted into cash within a short period. M2 is often used to assess the potential for future economic growth and inflation.

M1 money supply represents the most liquid form of money, easily accessible for transactions. It comprises cash, checkable (demand) deposits, and traveler's checks. These are the forms of money that individuals and businesses can readily use to make payments and settle debts.

In contrast, M2 money supply encompasses a broader range of financial assets that are less liquid but still considered money. It includes everything in M1 plus savings and time deposits, certificates of deposits, and money market funds. These assets are more stable and less prone to sudden fluctuations in value.

The distinction between M1 and M2 is essential for policymakers and investors. M1 money supply is a closely watched indicator of economic activity and inflation expectations. It reflects the amount of money available for immediate spending, which can impact consumer spending and business investment.