Money Supply Calculator (M1, M2, M3)
Break down money supply into M1 and M2 components.
Enter currency, demand deposits, savings, and money market balances to calculate each monetary aggregate.
Money supply is the total amount of money circulating in an economy, measured in layers that get progressively broader.
M1 is the narrowest and most liquid measure. It includes currency in physical circulation (coins and bills outside the banking system) plus demand deposits — the balances you can spend instantly with a check or debit card.
M1 = Currency in Circulation + Demand Deposits
M2 adds the less-liquid forms. Savings accounts, retail money market mutual funds, and small certificates of deposit (under $100,000) are included because they can be converted to spending money quickly, just not instantly.
M2 = M1 + Savings Deposits + Money Market Funds + Small Time Deposits
The United States stopped reporting M3 in 2006. M3 had added large-denomination CDs, institutional money market funds, and repurchase agreements — useful for tracking shadow-banking flows but expensive for the Fed to compile. Most central banks now work with M1 and M2.
Why these numbers matter: central banks watch M2 growth closely. Rapid M2 expansion often precedes inflation, because more money chasing the same goods pushes prices up. Milton Friedman’s famous claim that inflation is “always and everywhere a monetary phenomenon” was largely about M2 growth rates.
During COVID-19, US M2 grew about 25% in a single year — the fastest since World War II. The subsequent inflation surge, starting in 2021, tracked almost exactly what monetary economists would have predicted from that expansion, with roughly an 18-month lag.
For a national economy, these inputs would be in billions of dollars. For a classroom exercise or small community bank analysis, any scale works.