M1

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What is 'M1'

M1 is a measure of the money supply that includes all physical money, such as coins and currency, as well as demand deposits, checking accounts and Negotiable Order of Withdrawal (NOW) accounts. M1 measures the most liquid components of the money supply, as it contains cash and assets that can quickly be converted to currency. It does not contain "near money" or "near, near money" as M2 and M3 do.

BREAKING DOWN 'M1'

M1 as a definition of a country’s money supply focuses on money's role as an exchange medium. A customer paying for groceries can use coins, paper currency or write a check. All of these payment methods are part of M1. Demand deposits and checking accounts have become increasingly popular as an exchange medium with the advent of ATMs and debit cards.

M1 is the most narrowly defined component of the money supply and does not include financial assets such as savings accounts. Economists use it to quantify the amount of money in circulation.

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