Money Supply
The total amount of money circulating in an economy, measured in aggregates.
What is Money Supply?
Money supply refers to the total stock of money available in an economy. Central banks track it using aggregates: M1 (physical currency plus demand deposits), M2 (M1 plus savings accounts, money market funds, and small CDs), and M3 (M2 plus large institutional deposits). Rapid growth in money supply relative to economic output can fuel inflation; contraction can cause deflation. The Federal Reserve monitors money supply as one of many indicators but no longer targets it directly, preferring interest rates as the primary policy tool.
Example
During 2020–21, the US M2 money supply grew at an annual rate exceeding 25% — the fastest in modern history — as the Fed expanded its balance sheet and the government distributed stimulus payments, contributing to the 2022 inflation surge.
Source: FRED — M2 Money Stock