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The Money SupplyMeasuring M1 & M2

Federal Reserve Bank of San FranciscoEconomic Education Group

Date last updated: August 10, 2015

Money Supply – Did You Know?

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As a share of the total values shown above, M1 dropped from 26% in 1980 to 20% in 2010.1

Used

• By households and businesses • To make payments and to be held as

short-term investments

Components

• M1 = coin and currency in circulation, plus checking accounts

• M2 = M1 plus short-term liquid assets

Context

• The Fed uses M1 and M2 as a standardized way of defining money in the economy

1980 1990 2000 2010$0

$2

$4

$6

$8

$10

$12

$1.54

$3.22 $4.77

$8.60

M1 and M2($trillions, non-seasonally ad-

justed)

M2-M1 M1

Source: Federal Reserve Board

1. See PowerPoint file for technical note.

http://www.frbsf.org/education/teacher-resources/datapost FRBSF Economic Education Group

Money Supply – Components

• Savings Deposits• Time Deposits• Certain CDs• Money Market

Deposit Accounts• Money Market

Mutual Funds• Includes M1

M2

• Coin• Currency• Demand Deposits• Travelers Checks

M1M1 M2

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$3,007.60 $3,007.60

$8,974.30

M2-M1M1

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June 2015($trillions, seasonally adjusted)

Source: Federal Reserve Board

http://www.frbsf.org/education/teacher-resources/datapost FRBSF Economic Education Group

$0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 $9,000

Traveler's Checks; $3

Other Checkable Deposits; $506

Demand Deposits; $1,206

Currency and Coins; $1,293

Retail Money Market Funds; $614

Small-Denomination Time Deposits; $473

Savings Deposits; $7,888

M2 in DetailJune 2015 ($billions, seasonally adjusted)

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M1 components of M2

Source: Federal Reserve Board 8/6/15 data releaseNote: Components may not add to totals due to rounding

http://www.frbsf.org/education/teacher-resources/datapost FRBSF Economic Education Group

1980 1985 1990 1995 2000 2005 2010 2015$0

$2

$4

$6

$8

$10

$12

$14 M2-M1M1

M2

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Source: Federal Reserve Board 8/6/15 data release

Trends — M1 and M2 Jan. 1980 to Jun. 2015 ($trillions, seasonally adjusted)

M1

http://www.frbsf.org/education/teacher-resources/datapost FRBSF Economic Education Group

What Do You Think?

1. How much cash (coin + currency) do you currently have in your pocket, wallet, or purse? Is this cash part of M1 or M2?

2. Do you have a checking account? Is the balance in your checking account part of M1?

3. Do you have a savings account? Is your savings account balance part of M1?

4. How would you describe the trends of M1 and M2 since 1980? (See slide 5)

DataPost http://www.frbsf.org/education/teacher-resources/datapost FRBSF Economic Education Group