📚 What Is M2 (Money Supply)?

M2 is a measure of the total money available in an economy. It helps economists, investors, and governments understand how much money people and businesses have access to — which affects spending, investing, and inflation.

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🔍 What Does M2 Include?

1. M1 (Cash & Checking Accounts):

This includes physical cash, money in current (checking) accounts, and other instantly usable deposits. It’s the most liquid form of money.

2. Savings Accounts:

Money stored in savings accounts earns interest and is slightly less accessible. You can withdraw it, but there may be some limits.

3. Time Deposits (CDs):

These are fixed-term savings accounts (usually under $100,000). You agree to keep your money locked in for a certain time, and in return, you earn interest.

4. Money Market Funds:

These are low-risk mutual funds that invest in short-term assets. They offer higher returns than savings accounts but come with limited access.

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💡 Why Does M2 Matter?

When M2 increases, it usually means people have more money to spend — this can boost the economy. If it falls, spending may slow down, which can signal an economic slowdown or tightening by central banks.

Central banks, like the US Federal Reserve, closely monitor M2 to make decisions about interest rates and money printing.

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In short:

M2 gives a big-picture view of how much money is circulating and how healthy the economy might be. Watching it helps us understand where the market could be heading next.