Geldhoeveelheid I

M1 is one way to measure an economy’s money supply. Many countries, such as the United States and Japan, use this measure, and what it includes may vary from country to country.

Consider the United States, where M1 includes currency, demand deposits, and other liquid deposits.

Currency refers to notes and coins held by the public. The public includes persons and firms but excludes banks and other depository institutions.

Currency held by banks is excluded to prevent double-counting. A dollar bill in a bank vault is not yet available for the public to spend. It only becomes part of the M1 money supply when a person or firm withdraws it and holds it.

Next, 'Demand deposits' are primarily funds held in checking accounts. These funds are payable on demand.

Lastly, the category 'Other liquid deposits' includes several instruments. The key feature of these 'other liquid deposits' is that they act very much like checking accounts. They are funds that can be easily and quickly accessed to make payments, sometimes while also earning interest.

The M1 portion of the money supply shows the money that is available for immediate use in an economy.