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M2

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In the US, M2 is a broad measure of the money supply. M2 is the sum of M1 (i.e. currency in circulation plus checking account deposits and other checkable deposits in banks, credit unions, and other depository institutions) and other deposits not included in M1. Those deposits included in M2 (but not in M1) are: savings deposits such as MMDAs (i.e. money market deposit accounts), small time deposits (less than $100,000) and retail MMMFs (i.e Money Market Mutual Funds). Note that only retail MMMFs (not instiutional MMMFs) are included in M2. M2 is often used by economist as an indicator to evaluate the economic monetary climate. Economists also look at M2 to forecast inflation since M2 tends to have a stronger relationship to inflation than M1.



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