In
macroeconomics, money supply ("monetary aggregates", "money stock") is the quantity of currency and money in bank accounts in the hands of the non-bank public available within the economy to purchase
goods,
services, and
securities. The rate of interest is the price of money over time, that is, the price paid for deferring payment of monetary debts. The two are related inversely: as money supply increases interest rates will fall. When the interest rate equates the quantity of money demanded with the quantity of money supply, the economy is working at the money market equilibrium.
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Currency in circulation plus outstanding amounts of certain liabilities of monetary financial institutions (MFIs) that have a relatively high degree of liquidity and are held by non-MFI euro area residents outside the central government sector. The narrow monetary aggregate M1 has been defined as currency in circulation plus overnight deposits. The "intermediate" monetary aggregate M2 comprises M1 plus deposits with an agreed maturity of up to two years and deposits redeemable at notice of up to three months. The broad monetary aggregate M3 comprises M2 plus repurchase agreements, money market fund shares and units as well as debt securities with a maturity of up to two years. The Governing Council has announced a reference value for the growth of M3.
See also:
reference value for monetary growth
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