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Money Supply

Money supply is the quantity of money available within the economy to purchase goods and
services. It can be used as an indicator of the strength of consumer demand
 
  • Commonly used measures in the UK are M0 (Narrow Money) and M4 (Broad Money)
  • M0 comprises of the notes and coins in circulation plus banks’ operational deposits with the
    BofE. Growth in M0 indicates consumer spending is buoyant.
  • M4 comprises notes and coins in circulation, plus all instant access and time deposit accounts of UK residents with UK banks and building societies. It also includes deposits created by banks and building societies through their lending activities, as well as deposits lodged in accounts by people wanting to save.
  • The Bank of England can influence M0 and M4 by buying and selling securities, known as Quantitative Easing
  • Further Study Text: Pages 117-118