Broad Money

What is 'Broad Money'

In economics, broad money refers to the most inclusive definition of the money supply. Since cash can be exchanged for many different financial instruments and placed in various restricted accounts, it is not a simple task for economists to define how much money is currently in the economy. Therefore, the money supply is measured in many different ways. Broad money is used colloquially to refer to a broad definition of the money supply.

BREAKING DOWN 'Broad Money'

In the U.S. the most common measures of the money supply are termed M0, M1, M2 and M3. These measurements vary according to the liquidity of the accounts included. M0 includes only the most liquid instruments, and is therefore narrowest definition of money. M3 includes includes liquid instruments as well as some less liquid instruments and is therefore considered the broadest measurement of money. Complicating the situation, different countries often define their measurements of the money slightly differently. In academic settings, the term "broad money" should be separately defined in order to prevent potential misunderstandings.

RELATED TERMS
  1. M3

    A measure of money supply that includes M2 as well as large time ...
  2. Narrow Money

    A category of money supply that includes all physical money like ...
  3. M1

    A measure of the money supply that includes all physical money, ...
  4. Money Zero Maturity - MZM

    A measure of the liquid money supply within an economy. MZM represents ...
  5. Accounting Measurement

    The computation of economic or financial activities in terms ...
  6. Easy Money

    In the most literal sense, money that is easily acquired. Academically ...
Related Articles
  1. Economics

    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.
  2. Economics

    What is M1?

    M1 is a measurement of money supply that includes all hard currency, plus demand deposits such as checking accounts.
  3. Retirement

    Economic Indicators: Money Supply

    By Ryan Barnes Release Date: Weekly, every Thursday Release Time: 4:30pm Eastern Standard Time Coverage: M1 and M2 (M3 ...
  4. Economics

    What Is 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?
  5. Economics

    How Do Central Banks Inject Money Into The Economy?

    Central banks inject money into the banking system, and remove money from it, through monetary policy actions.
  6. Economics

    How Does China Manage Its Money Supply?

    Here's how the Central Bank of China manages its currency rates and the money supply.
  7. Personal Finance

    Get A Short-Term Advantage In The Money Market

    This investment vehicle is often the perfect stop-gap measure for growing your money.
  8. Economics

    Understanding How the Federal Reserve Creates Money

    Read about how the Federal Reserve actually targets and creates new money in the economy, and find out why the savings and loans system magnifies this process.
  9. Financial Advisors

    Impact of SEC's New Money Market Fund Rules

    A look at how new rules introduced by the SEC will impact money market funds.
  10. Mutual Funds & ETFs

    Why Money Market Funds Break The Buck

    These funds are noted for their safety in a rough market. Read on to find out why.
RELATED FAQS
  1. 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 >>
  2. Will M1 ever become obsolete?

    Learn why the M1 money supply may evolve and transform into different mediums but will continue to remain in existence for ... Read Answer >>
  3. If I want to have some cash in a liquid account for unexpected emergencies, what ...

    It's always a good idea to keep some money set aside in a liquid form, but it's a double-edged sword, because the more liquid ... Read Answer >>
  4. How does money supply affect inflation?

    Learn about two competing economic theories of the role of the money supply and whether money supply necessarily causes inflation ... Read Answer >>
  5. Why would you keep funds in a money market account and not a savings account?

    Read about the differences between money market accounts and savings accounts, and see why a depositor would elect a money ... Read Answer >>
  6. 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 >>
Hot Definitions
  1. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  2. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  3. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  4. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
  5. Sharing Economy

    An economic model in which individuals are able to borrow or rent assets owned by someone else.
  6. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
Trading Center