Supply of Money There are several definitions of the supply of money. M 1 is narrowest and most commonly used. It includes all currency (notes and coins) in circulation, all checkable deposits held at banks (bank money), and all traveler's checks. A somewhat broader measure of the supply of money is M 2, which includes all of M1 plus savings and time deposits held at banks. An even broader measure of the money supply is M 3, which includes all of M 2 plus large denomination, long-term time deposits —for example, certificates of deposit (CDs) in amounts over $100,000. Most discussions of the money supply, however, are in terms of the M 1 definition of the money supply. Banking business. In order to understand the factors that determine the supply of money, one must first understand the role of the banking sector in the money-creation process. Banks perform two
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