Broad Money

Although M! is, strictly speaking, the most appropriate measure of money as a means of payment. a second closely watched aggregate is broad M1 or M2. Sometimes called as well as savings accounts in hanks and similar assets that are very close substitutes for narrow money.

There are. many other technical definitions of money that are used by specialists in monetary economics. But for our purposes, we need master only the two major definitions of money.

Money is anything that serves as a commonly accepted medium of exchange. The most important concept is narrow money, or 1 which is the sum of coins and paper- currency in circulation outside the banks, plus check able deposits. Another important monetary aggregate is broad money (called 2), which includes assets such as savings accounts in addition to coins, paper currency, and check able deposits.

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