What is MONEY SUPPLY?

What is money supply?

• Am i right to say it's the value of money? And how is it related to monetary base?

• Answer:

  The "money supply" refers to a certain portion of wealth that is available and recognized for buying and selling goods. There are different definitions for money, because not all wealth is readily available for transaction purposes. The cash in my wallet is the most readily available, and checking accounts are almost as liquid. But, the equity in my house is not very liquid, since I would first have to sell my house to use that equity. So, economists rank savings/wealth from most liquid to least liquid, and put them in different categories of money -- M0, M1, M2, .... M0: The total of all physical currency, plus accounts at the central bank that can be exchanged for physical currency. M1: M0 + the amount in demand accounts ("checking" or "current" accounts). M2: M1 + most savings accounts, money market accounts, small denomination time deposits and certificate of deposit accounts (CDs) of under $100,000. M3: M2 + all other CDs, deposits of eurodollars and repurchase agreements