The form of M1 money in an economy may change over time, but M1 money will continue to exist for the foreseeable future; it is the currency used as a medium of exchange. As long as goods need to be purchased, M1 money will be needed.

When calculating the money supply, economists count various pools of currency that are liquid and accessible or nearly liquid and easily convertible into cash. A common basis for determining the money supply at a given time is to identify all M1 funds. This includes hard currency in circulation, such as coins and paper notes, plus easily retrievable financial products such as checking accounts, traveler's checks and certain other demand deposits.

As technology progresses, so does the form of an economy's currency. At one time all currency was in the form of commodity money, which is currency either made from or based on an actual commodity (such as gold) that has value independent of its value as a medium of exchange. Most modern economies now use fiat money, which only has value because a government decreed it as legal tender and because people have faith in its value, the government that issued it and the economy's ability to produce desired goods. Today, physical currency is used less as electronic forms of payment have become more widespread.

An emerging form of M1 money is bitcoin, an alternative to central bank-issued fiat money. Though digital, bitcoin is easily converted to traditional cash through exchanges. Although the M1 money supply is evolving away from paper currency, money still remains in other forms.

  1. How much of the United States' money supply is M1?

    Learn how much money is in the M1 category of the United States money supply. Learn how M1 has averaged and changed over ... Read Answer >>
  2. Does M1 include foreign currency?

    Learn the definition of M1, as well as other categories of money supply in the United States. Learn how it may differ in ... Read Answer >>
  3. What types of money are included in money supply?

    Read about several different monetary aggregates used to define the money supply, both at the Federal Reserve and by outside ... Read Answer >>
  4. Is credit a form of fiat money?

    Discover what fiat money is, learn how it developed historically into its use in most modern economies, and explore its relationship ... Read Answer >>
  5. Is all paper money fiat money?

    Learn how the United States has converted from a gold-backed money system to a fiat one. Learn what is considered fiat money ... Read Answer >>
  6. What is the difference between fiat money and representative money?

    Learn the main differences between fiat money and representative money. Differences include actual physical currency and ... Read Answer >>
Related Articles
  1. Small Business

    M1 Finance LLC

    M1 Finance is a new robo-advisor that aims to take the work out of portfolio maintenance for DIY investors.
  2. Investing

    Understanding Money Supply

    Money supply – also called money stock -- refers to the total amount of currency and other liquid financial products in an economy at a particular time.
  3. Insights

    What is Money?

    Money: It's a part of everyone's life, and we all want it, but do you know how it gains value and how it is created?
  4. Insights

    What Part of the Money Supply is M2?

    M2 is the part of the money supply economists use to analyze and predict inflation.
  5. Tech

    What Is Bitcoin's Intrinsic Value?

    What would bitcoin's price look like in the event of widespread adoption?
  6. Investing

    What is Fiat Money?

    Fiat money is currency that a government has declared to be legal tender, but is not backed by a physical commodity.
  7. Investing

    What is a Demand Deposit?

    A demand deposit is any type of account where the money in the account may be withdrawn at any time without prior notice to the financial institution.
  8. Insights

    How Currency Works

    Currency offers key advantages over economies based on direct trade. It provides sellers with a broader market for their goods and services. It is also a durable asset for people to accumulate ...
  1. M2

    A measure of money supply that includes cash and checking deposits ...
  2. Monetary Aggregates

    Broad categories measuring the total value of the money supply ...
  3. Narrow Money

    A category of money supply that includes all physical money like ...
  4. M3

    A measure of money supply that includes M2 as well as large time ...
  5. Fiat Money

    Currency that a government has declared to be legal tender, but ...
  6. Checking Account

    A transactional deposit account held at a financial institution ...
Hot Definitions
  1. Block (Bitcoin Block)

    Blocks are files where data pertaining to the Bitcoin network is permanently recorded.
  2. Fintech

    Fintech is a portmanteau of financial technology that describes an emerging financial services sector in the 21st century.
  3. Ex-Dividend

    A classification of trading shares when a declared dividend belongs to the seller rather than the buyer. A stock will be ...
  4. Debt Security

    Any debt instrument that can be bought or sold between two parties and has basic terms defined, such as notional amount (amount ...
  5. Taxable Income

    Taxable income is described as gross income or adjusted gross income minus any deductions, exemptions or other adjustments ...
  6. Chartered Financial Analyst - CFA

    A professional designation given by the CFA Institute (formerly AIMR) that measures the competence and integrity of financial ...
Trading Center