It is a measure of the amount of liquidity available in the economy, i.e., the amount of 'ready money' that individuals can spend or invest.

It consists of:

circulating cash

money in checking accounts

deposits that can be easily withdrawn

Why is it important?

Because an increase in M2 means that there is greater liquidity in the market, which may lead to increased spending...

However, if there is no real economic growth to match this liquidity, it could lead to inflation.

Currently, we are witnessing an increase in liquidity in some countries, which reflects on prices, interest rates, and investment movements.

Understanding M2 helps us read the economic landscape more clearly.