Description                                  
In this presentation, the narrator describes how the money supply is measured. 

Narrator: 
The money supply is measured by the Federal Reserve System in terms of money aggregates. 

Narrator: 
The three primary measures of the money supply in the U.S. are M1, M2 and M3. 

Narrator: 
The M1 money supply consists of currency, demand deposits, travelers checks and other checkable deposits. The M1 money supply consists of money forms that can be spent directly. Sometimes, M1 is called "transactions money". M1 funds are very liquid. This means that they can be easily and directly spent.  

Narrator: 
M2 consists of M1 plus retail money market fund balances, savings deposits, and small time deposits such as small certificates of deposit, commonly knows as CD's. Since it includes more than M1, M2 is said to be a broad measure of the money supply. And since retail money market accounts and CD's have restrictions on their use and minimum balances, they are less liquid than M1 components. 

Narrator: 
M3 is a combination of M2 plus large denomination time deposits and items such as institution only money market fund deposits. 

Narrator: 
M1 and M2 are the most commonly used measures of money.  

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