In economics, the money supply refers to all of the cash and currency in circulation within a country. A country’s money supply has a significant effect on a country’s macroeconomic profile, particularly in relation to interest rates, inflation, and the business cycle. In America, the Federal Reserve determines the level of monetary supply. Among the economic schools that closely analyze the role of money supply on economic stability are Monetarism and Austrian Business Cycle Theory.
M1 is a narrow measure of the money supply that includes physical currency, demand deposits, traveler's checks, and other checkable deposits. M1 does not include financial assets, such as savings accounts and bonds.
