3 thoughts on “What are M1 and M2 currencies?”

  1. First, M1 and M2 are categories of currency supply. People generally measure, analyze, and regulate the currency supply into different levels based on the size of the liquidity. In practice, the country M1 and M2, which are concerned about M, have different definitions, but they are divided according to the size of liquidity. M's liquidity is the strongest, M1 is the worst, M2 is the worst. Currency supply refers to the currency stock of circulation and payment methods throughout the society at a certain point in time.
    . At this stage, China divides the currency supply into three levels:
    The first is the cash of M0 circulation, that is, cash circulating outside the banking system;
    Supply M1, that is, M1 = M0 Enterprise Deposit Organizations, Groups, Army Deposit Rural Deposit Personal Credit Card Deposit.
    The third is the broad currency supply M2, that is, M2 = M1 urban and rural residents savings deposits fixed -nature deposits in corporate deposits trust deposits other deposits. It reflects the actual purchasing power in the economy; M2 not only reflects real purchasing power, but also reflects potential purchasing power. If the M1 grows rapidly, the consumption and terminal market will be active, and inflation will occur; if the M2 economy grows rapidly, investment and intermediate markets will be active. Asset bubbles appear.
    The expansion information:
    . In the M1 structure, M0 is the main medium to realize the purchasing power of consumer goods in my country, which has an important impact on the national retail product price index; It is closely related to the price level of production materials and industrial production. M1 is the advanced indicator of economic cycle fluctuations and price fluctuations. The close monitoring and supervision of M1 is of great significance to suppress inflation and achieve economic health.
    . The differences between M2 and M1 are mainly the difference between the scissors between residents' savings deposits and corporate regular deposits M2 and M1 growth. It can be similar to a observation variable that determines the degree of capital activity, especially at the corporate level. In addition to cash, M1 is more of corporate deposits, and quasi -currencies other than M1 and M1 are more regular deposits, which is actually a form of assets. The smaller the scissors (M2-M1 growth rate), the higher the demand for currency supply deposits, the higher the economic vitality, the larger the scissors difference, and the higher the proportion of regular deposits.

  2. M1 (narrow currency): M0 plus commercial banks' current deposit composition.

    m2 (broad currency): consisting of M1 plus quasi -currency. The quasi -currency is composed of regular deposits, savings deposits, foreign currency deposits, and various short -term credit tools such as bank acceptance bills and short -term national treasury coupons.
    m1 = m0 Enterprise and institution for current deposits;
    m2 = m1 Enterprise and institutions regular deposits residential savings deposits.
    m0 (cash): It refers to cash flowing outside the banking system, that is, cash in the hands of residents and spare money from corporate units, excluding inventory cash of commercial banks.

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