Money supply
Money supply is simply the amount of money available in the economy.
Money supply is simply the amount of money available in the economy. There are several ways of measuring the various sorts of money, depending on how wide you make the definition.
In the UK, M0 - also called narrow money - includes only the most liquid types of money: cash, cash in bank tills, and deposits held at the Bank of England. M4 (M3 in the US) consists of cash, current-account deposits at banks and other financial institutions, and savings deposits.
Central banks keep a close eye on the money supply in the belief that it affects prices. If the amount of money in circulation rises, and the number of goods produced does not, then prices rise. This is called demand 'pull inflation', which in turn leads to commodity price rises that push other prices higher and creates 'push inflation'.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Sign up to Money Morning
Our team, led by award winning editors, is dedicated to delivering you the top news, analysis, and guides to help you manage your money, grow your investments and build wealth.
-
The top stocks in the FTSE 100
After a year of strong returns for the UK’s flagship index, which FTSE 100 stocks have posted the best performance in 2024?
By Dan McEvoy Published
-
A junior ISA could turn your child’s pocket money into thousands of pounds
Persuading your child to put their pocket money in a junior ISA might be difficult, but the pennies could quickly grow into pounds – and teach them a valuable lesson about money
By Katie Williams Published