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What Is Broad Money, | Overview, - Narrow Money, Broad Money,

 What is broad money? Broad money is a term used to describe the monetary base or total amount of cash and coins in circulation. 

The Federal Reserve Bank of St. Louis defines broad money as M1 plus M2 (M3 is also included). This means that broad money consists of both currencies held at banks and demand deposits.

 Broad money is the sum of currency and bank reserves. It represents the total amount of cash and coinage in circulation. In other words, it’s the total value of all U.S. dollars in circulation. 

 The Fed uses broad money to measure the economy because it provides a better picture of the overall health of the economy. 

For example, if the economy is growing rapidly, the growth rate of broad money should increase. If the economy is shrinking, then the decline in broad money would indicate a contraction.

 Broad money has become a key indicator for measuring the health of the economy. As such, it is important to monitor changes in broad money over time.

What is broad money?

 Broad money is the total amount of currency circulating in the economy. Broad money includes cash, checks, credit cards, debit cards, traveler cheques, and any other type of monetary instruments that are accepted by banks and financial institutions.

How does broad money differ from narrow money?

 Narrow money refers to the actual physical cash and coins in circulation. Narrow money includes cash, coins, banknotes, and demand deposits. Broad money includes all forms of money that are not considered narrow money. 

Broad money consists of checking accounts, savings accounts, certificates of deposit, commercial paper, government securities, mutual funds, stocks, bonds, and other types of investments.

Why do we need both broad and narrow money?

 The U.S. government uses two different systems to measure the size of its economy. One system measures the value of goods and services produced in the United States.


The second system measures the total value of all the money in circulation. These two numbers are often referred to as the real GDP and M1 respectively. 

The difference between these two figures is called the broad money supply.

How is the broad money supply calculated?

 The broad money supply is calculated by adding together all the money in circulation including cash, check credit card, debit card, traveler's cheque, and any other type that is accepted by banks and financial institutions. 

The result is then divided by the number of people in the country.

What is the current rate of inflation?

 Inflation is the increase in prices over time. In the U.S., inflation currently stands at 2.8%.

How much money did the U.S. government print in 2017?

 The Federal Reserve printed $894 billion dollars in 2017.

Is the U.S. dollar losing value?

 Yes, the U.S. Dollar is losing value. The U.S. Dollar lost about 1% of its value last year.

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