Money supply (also known as money stock) refers to the money stock of the whole society, and is the total amount of money that the whole society undertakes as a means of circulation and payment at a certain point in time. Various financial assets such as cash and deposits from financial institutions.
Referring to international principles and according to the actual situation in my country, the People’s Bank of China divides my country’s money supply indicators into four levels:
M0, refers to cash or currency in circulation. That is, the total amount of currency issued by the People’s Bank of China over the years.
M1, refers to M0 + corporate demand deposits + institutional group deposits + rural collective deposits. Also known as “narrow money supply”.
M2 refers to M1 + corporate time deposits + self-raised infrastructure deposits + household savings deposits + other deposits (excluding fiscal deposits). Also known as “broad money supply”.
As far as the above basic concepts are concerned, M-1 has extremely strong liquidity and is the key control object of the National Central Bank.
In addition, there is M3, which refers to M2 + bonds, fiscal deposits + deposits from other financial institutions + monetary interbank deposits. The M3 was established in consideration of the current situation of financial innovation, and it is not currently estimated in my country.
M4, namely: M4=M3+ other short-term current assets
Under the condition of market economy, the role of financial macro-control is becoming more and more obvious. As the People’s Bank of China, which performs the functions of the central bank, the ultimate purpose of its monetary policy is to maintain the stability of the value of the RMB . A marked change has taken place. In order to achieve this goal, the PBC’s macro-control should shift from both total control and structural adjustment to total control. The so-called total control is to control the money supply of the entire banking system. The growth of money supply must be compatible with economic growth in order to promote the sustained, rapid and healthy development of the national economy. Therefore, to analyze whether the money supply at each level in a certain stage is reasonable, it must be related to the economic growth rate at that time and the speed of currency circulation. Generally speaking, the main indicator to measure whether the money supply is balanced is the basic stability of the price level. If the general price index fluctuates greatly, it means that the supply and demand of money is not balanced, otherwise, it means that the supply and demand are normal.
In this sense, the money supply is also an economic index related to ordinary people. Its quantity and magnitude affect the speed of the national economy.