UK Accounting Glossary
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 institutional MMMFs) are included in M2. M2 is often used by economists 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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This glossary post was last updated: 7th February 2020.