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How is the supply of money measured? Who influences how much liquidity is created or reduced...

How is the supply of money measured? Who influences how much liquidity is created or reduced in the U.S. economy?

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Answer #1

The Federal Reserve measures the U.S. money supply with M1 and M2. M1 includes currency in circulation and all travelers' checks. It also includes checking account deposits. M2 includes all the constituents of M1 and also savings account, money market accounts and money market mutual funds. It also includes time deposits of banks. M3 includes all the things in M2 as well as some longer term time deposits and money market mutual funds. M4 includes M3 and some other deposits.

The Central Bank of the country or Fed influences how much liquidity is created or reduced in the U.S. economy.

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