Money Supply

The total amount of money circulating in an economy, measured in progressively broader categories: M0 (physical currency), M1 (M0 plus demand deposits), and M2 (M1 plus savings deposits and money market funds). Central banks influence the money supply through interest rate policy and open market operations. Traders watch money supply data because rapid expansion can fuel asset price inflation, while contraction can starve markets of the liquidity they need to sustain rallies.