The measure of money supply is an important economic indicator used to measure the amount of money circulating in an economy at a given time. Economists and policymakers track various measures of money supply to understand economic conditions and implement monetary policy. The primary money supply measures are typically categorized into several aggregates, such as M0, M1, M2, M3, and sometimes even broader measures. Details are as follows:
M0 (Monetary Base) is the total of all physical currency in circulation (coins and banknotes) and the reserves held by the central bank.
• Currency circulation
• Bank reserves held at the central bank
M1 is the narrow measure of money supply that includes highly liquid forms of money. These are
• Currency outside bank
• Demand deposit (Current account)
M2 is a broader measure of the money supply, including M1 plus additional, less liquid forms of money. These are:
• Currency outside bank
• Demand deposit (Current account)
• Time deposit (FD)
According to Bangladesh Bank data, the currency outside banks amounts to 2643493 million, and the demand deposit is 1900355 million as of April 2024. Additionally, the time deposit stands at 14919035 million as of April 2024.
Bangladesh Bank is going to formulate a new monetary policy for the first half of FY 2024-2024. This money measurement is used to understand the money supply in the market and formulate monetary policy to reduce inflation.
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