M1 and M2 are categories of money supply. People generally divide the money supply into different levels for measurement, analysis and regulation based on the size of liquidity. In practice, various countries treat M. The definitions of M1 and M2 are different, but they are all divided according to the size of liquidity, M. has the strongest liquidity, followed by M1, and M2 has the worst liquidity. ?

Money supply refers to the currency stock that the whole society bears as a means of circulation and payment at a certain point in time. At this stage, my country divides the money supply into three levels:

The first is cash in circulation M0, that is, cash circulating outside the banking system;

The second is narrow money supply M1, that is, M1=M0, enterprise demand deposits, institutions, groups, military deposits, rural deposits, credit card deposits held by individuals.

The third is broad money supply M2, that is, M2=M1 urban and rural residents’ savings deposits, corporate deposits with fixed-term nature, trust deposits and other deposits. 1 reflects the actual purchasing power in the economy; M2 not only reflects the actual purchasing power, but also reflects the potential purchasing power. If M1 grows faster, the consumption and terminal markets will be active and inflation will occur;

If M2 grows faster, the investment and intermediate markets will be active. Asset bubbles emerge.

In the structure of M1, M0 is the main medium for realizing the purchasing power of my country’s residents’ consumer goods, and has an important impact on the national retail commodity price index; the remaining demand deposits are the main medium for the purchasing power of the production means market, and are closely related to the production There is a close relationship between data price levels and industrial production.

M1 is a leading indicator of economic cycle fluctuations and price fluctuations. Close monitoring and regulation of M1 is of great significance to suppress inflation and achieve healthy economic growth.

Extended information:

The difference between M2 and M1 is mainly residents’ savings deposits and corporate time deposits

The scissors difference between the growth rates of M2 and M1 can be Approximately, it can be regarded as an observation variable to judge the degree of capital activity, especially at the enterprise level. Because M1, in addition to cash, is mostly corporate demand deposits, while M2, except M1, is mostly quasi-currency time deposits, which is actually a form of asset.

The smaller the scissors difference (M2-M1 growth rate), the higher the tendency of money supply deposits to be current, the higher the economic vitality, the larger the scissors difference, and the higher the proportion of deposits to be current.

Reference: Baidu Encyclopedia_Money Supply