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'.

Most Popular

UK house prices are definitely cooling off – but are they heading for a fall?
House prices

UK house prices are definitely cooling off – but are they heading for a fall?

UK house prices hit a fresh high in June, but as interest rates start to rise, the market is cooling John Stepek assesses just how much of an effect h…
30 Jun 2022
The ten highest dividend yields in the FTSE 100
Income investing

The ten highest dividend yields in the FTSE 100

Rupert Hargreaves looks at the FTSE 100’s top yielding stocks for income investors to consider.
22 Jun 2022
Gold has been incredibly boring to own – but that’s no bad thing right now
Gold

Gold has been incredibly boring to own – but that’s no bad thing right now

Stocks, bonds and cryptocurrencies have all seen big falls this year. But gold remains at its one-year average. It may be dull, but it’s doing what it…
29 Jun 2022