Money Supply
The total stock of money in circulation — tracked via M1, M2, and M3 aggregates — a key input to inflation and liquidity analysis.
The money supply measures the total amount of money available in an economy. It is segmented into aggregates: M1 (physical currency + demand deposits), M2 (M1 + savings accounts + money market funds), and M3 (M2 + large-time deposits).
Rapid expansion of the money supply — especially through QE or fiscal stimulus — is often a precursor to inflation, as more money chases the same amount of goods. Traders and economists track M2 growth as a longer-term inflation signal and a measure of liquidity available to flow into financial assets.
Related Terms
Federal Reserve
The U.S. central bank — its rate decisions and forward guidance move global markets more than any other single institution.
BeginnerInflation
The rate at which the general price level of goods and services rises, eroding purchasing power over time.
BeginnerMonetary Policy
Central bank actions — rate changes, asset purchases, reserve requirements — designed to control inflation and support employment.
BeginnerQuantitative Easing (QE)
A central bank's large-scale asset purchases that inject liquidity into the system and push down long-term interest rates.
IntermediateTapering
The gradual reduction in the pace of a central bank's asset purchases — a step toward tightening that precedes rate hikes and signals the end of QE.
Intermediate