9.4.2—Money supply

The money supply is the quantity of money in circulation or in relevant bank accounts, depending on the measure used. Narrow measures contain highly liquid cash and deposits; broader measures include less liquid assets.

Credit creation, bank lending, central-bank operations, government balances and public preferences can change the measured supply. The definition and boundary of the monetary aggregate must be stated.

A bank loan credits a borrower’s deposit, increasing spendable bank money, while a repayment can destroy that deposit money. The central bank’s reserve balance is not identical to household money.

The money supply is not just notes and coins, and a larger monetary aggregate does not mechanically create the same increase in real output.