Measure of money supply gives an estimate of the total supply of money in circulation in a given country's economy at a given time. Occasionally you may hear (perhaps on Bloomberg) reference to M1, M2 and M3 indicators, these represent the following, and is key to measuring the wealth of an economy:
M1
A
measure of the
money supply that includes all
coins,
currency held by the public,
traveler's cheques, checking
account balances,
NOW accounts, automatic transfer service accounts, and balances in
credit unions.
M2
A measure of the money supply that includes M1, plus
savings and small time
deposits, overnight
repos at
commercial banks, and non-institutional
money market accounts.
* A key economic indicator used to forecast inflation *
M3
A measure of the money supply that includes M2, plus large time deposits, repos of maturity greater than one day at commercial banks, and institutional money market accounts.