Broad Money

AAA

DEFINITION of '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.

INVESTOPEDIA EXPLAINS '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. M1

    A measure of the money supply that includes all physical money, ...
  3. M2

    A measure of money supply that includes cash and checking deposits ...
  4. Narrow Money

    A category of money supply that includes all physical money like ...
  5. Money Supply

    The entire stock of currency and other liquid instruments in ...
  6. Money

    An officially-issued legal tender generally consisting of currency ...
Related Articles
  1. Economics

    What Is Fiscal Policy?

    Learn how governments adjust taxes and spending to moderate the economy.
  2. Economics

    Monetarism: Printing Money To Curb Inflation

    Learn how Milton Friedman's monetarist views shaped economic policy after World War II.
  3. Fundamental Analysis

    What Is the Quantity Theory of Money?

    Take a look at the tenets, assumptions and challenges of monetarism's principal theory.
  4. Economics

    What Caused The Great Depression?

    Learn how government actions may have contributed to this major economic downturn.
  5. Savings

    How Microeconomics Affects Everyday Life

    Microeconomics is the study of how individuals and businesses make decisions to maximize satisfaction. Microeconomic principles can describe many everyday experiences. We use renting a New York ...
  6. Personal Finance

    Why Are Tesla Cars So Expensive?

    What makes Tesla cars so expensive? Short supply and pricey parts is a good place to start.
  7. Economics

    What is the Income Effect?

    In economics, the income effect is the change in the consumption of goods caused by a change in income, whether income goes up or down.
  8. Economics

    What is M1?

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

    What Has Been Groupon’s Growth Strategy?

    Groupon established a strategy with efforts to become a broader force in the e-commerce world and to expand more strongly into international markets.
  10. Economics

    The Impact Of Ending The US Embargo On Cuba

    Many argue that ending the US embargo on Cuba will not only make US consumers happy, but also help the US economy and bring more freedoms to Cuba.

You May Also Like

Hot Definitions
  1. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  2. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
  3. Market Value

    The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization ...
  4. Preference Shares

    Company stock with dividends that are paid to shareholders before common stock dividends are paid out. In the event of a ...
  5. Accrued Interest

    1. A term used to describe an accrual accounting method when interest that is either payable or receivable has been recognized, ...
  6. Absorption Costing

    A managerial accounting cost method of expensing all costs associated with manufacturing a particular product. Absorption ...
Trading Center