M= cash in circulation;
M1=M+ corporate demand deposits+deposits of institutions, organizations and troops+rural deposits+credit card deposits held by individuals;
M2=M1+ savings deposits of urban and rural residents+fixed deposits in corporate deposits+trust deposits+other deposits;
M3=M2+ financial bonds+commercial paper+large negotiable certificate of deposit, etc.
In China, M1 is the narrow money supply, M2 is the broad money supply, and M3 is added for financial innovation.
Money is a product of commodity exchange, which is a commodity that is separated from the commodity world and acts as universal equivalent. Commonly known as money.
Currency (CCY) is a tool to measure prices, a medium to buy goods, and a means to preserve wealth. It is a contract between property owners and the market about exchange rights, which is essentially an agreement between owners. Including currency in circulation, bank notes, etc.
There are still a lot of arguments about the nature of money. There are various concepts of money in economics. At first, it was defined by the function of money, and later it was defined as an economic variable or a policy variable. Traditionally, there are the following definitions of money:
generally accepted items used to pay for goods, services and debts;
articles that serve as a medium of exchange, and are standard in value, storage, price and deferred payment;
Excess supply or demand will lead to excess demand or supply of assets for other assets;
temporary residence of purchasing power;
liquid assets that are not required to pay interest and are public net wealth;
the largest liquid assets related to national income, etc. In fact, the above six articles all belong to the functional definition of money.
The latest monetary theory holds that money is a contract between the owner and the market about the exchange right, which is basically an agreement between the owners. I give what I have to the market in exchange for what I need, and money is the agreement of this process. This theory can withstand strict falsification and logical argumentation, explain all monetary-related economic phenomena, and be tested by all economic practices, which has put an end to the dispute over the essence of money for hundreds of years.
Logical reasoning and proof of the essence of money:
When the market is in the barter stage, whether the exchange can take place depends on the complementarity of supply and demand between the two parties. This complementarity does not always exist. Maybe A is short of B, while B is short of D. If there are only two parties, then the exchange cannot be carried out. Assuming that there is C, the other D is short of A, then under a certain agreement, the exchange can take place between Party A, Party B and Party C in the form of mutual exchange. This agreement is that B and C agree that they can exchange A for D, so that he can exchange B for A, although A is not what he ultimately needs, and it acts as a medium of exchange. We extend our role in this case, referring to A as a buyer, B as a seller and C as a market, which can be either a C or a combination of internal exchanges. In this way, A acts as currency, that is, A uses A to buy B he needs, while B holds A and exchanges it with C for D..
When the exchange takes place in a wider range, the importance of the two-way matching between supply and demand of both sides of the exchange is decreasing. If the market is large enough, there will always be a possible third party who can provide the missing supply to meet the needs of the exchange. This third party is the market, and the market is the totality that includes all the exchanges. In the above example of A, B and C exchange, we assume that C contains D, E and G to make a general explanation: suppose that D is short of E, E is short of F, and G is short of A. Obviously, if the exchange can be carried out, B, D and E should agree with the receiver of A that A can exchange what it needs, so B, D and E have a * * * agreement.