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AD CURVE: The aggregate demand curve, which is a graphical representation of the relation between aggregate expenditures on real production and the price level, holding all ceteris paribus aggregate demand determinants constant. The aggregate demand, or AD, curve is one side of the graphical presentation of the aggregate market. The other side is occupied by the aggregate supply curve (which is actually two curves, the long-run aggregate supply curve and the short-run aggregate supply curve). The negative slope of the aggregate demand curve captures the inverse relation between aggregate expenditures on real production and the price level. This negative slope is attributable to the interest-rate effect, real-balance effect, and net-export effect.
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M1: The narrow-range monetary aggregate for the U.S. economy containing the combination of currency (and coins) issued by government and held by the nonbank public and checkable deposits issued by banking institutions. M1 contains the two items that function as THE medium of exchange for the U.S. economy. M1 is one of three monetary aggregates tracked and reported by the Federal Reserve System. The other two are designated M2 and M3. M1 is the official money supply for the U.S. economy. If someone makes payment to purchase a good, service, or resource, they generally do so using one of the two primary components of M1--paper currency (and metal coins) or the funds deposited in a checking account. Some Recent NumbersM1 June 2004 (Billions) |
| Component | Amount |
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| Currency | $676.8 | Checkable Deposits | 650.7 | | Demand Deposits | 321.6 | | | Other Checkable Deposits: Banks | 187.2 | | | Other Checkable Deposits: Thrifts | 141.9 | | Nonbank Travelers Checks | 7.7 | |
| Total M1 | $1,335.2 |
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| The table to the right presents values for M1 and its key components, currency and checkable deposits. While these numbers are likely to change as economic conditions change, a few tidbits can be garnered from the numbers provided.- First, in early 2004 M1 was running at just over $1.3 trillion. This was approximately $4,500 for every man, woman, and child in the United States. A great deal of spendable money is in circulation around the economy.
- Second, this M1 total was divided almost equally between currency and checkable deposits. This has not always been the case. A few decades back, currency was only about one-fourth of M1 and checkable deposits were three-fourths.
- Third, the currency part of M1 suggests that every man, woman, and child in the country has an average of $2,300 of cash and coins. Because most people are likely to have significantly less than this average, some folks clearly have significantly more. While this reflects legal activities, including retain stores that handle large amounts of cash, it also reflects a host of illegal activities, such the drug trade.
CurrencyApproximately one-half of M1 is comprised of paper currency and metal coins issued by government. In particular, M1 includes ONLY the currency and coins held by the nonbank public, which is anyone and everyone EXCEPT commercial banks and government banking authorities. Currency and coins held by the nonbank public also go by the phrase "currency in circulation."Currency has taken many forms over the years and has been issued or authorized by different entities. The present manifestation of currency includes Federal Reserve notes issued by the Federal Reserve System and metal coins issued by the U.S. Department of the Treasury. In the not too distant past, currency also included gold and silver certificates issued by the U.S. Department of the Treasury and bank notes issued by commercial banks. - Federal Reserve Notes: These are issued under the authority of the Federal Reserve System. They come in denominations of $1, $5, $10, $20, $50, and $100. A few bills carrying a $2 are encountered from time to time, but they have largely vanished from circulation. Denominations larger than $100 ($500, $1,000, $5,000, and $10,000) were also available once upon a time, but they too are seldom seen beyond the collections of numismatics. In a never ending effort to thwart counterfeiters, Federal Reserve notes underwent a major redesign beginning in the 1990s.
- Treasury Coins: These are issued under the authority of the U.S. Department of the Treasury. They come in denominations of one cent, five cents, ten cents, twenty-five cents, fifty cents, and one dollar. The coins were once made from pure metal (copper, nickel, and silver), with relative sizes reflecting the value of the metal content. However, pure metals gave way to less expensive metal alloys as coins made the transition from commodity money to fiat money.
Checkable DepositsThe other half of M1 is comprised of checkable deposits, which are checking account balances maintained by commercial banks (including credit unions, savings and loan associations, and mutual savings banks). Checking account balances also go by the names "transactions balances" or "transactions deposits" to reflect the role they play in the transactions for goods and services.An assortment of different types of checking accounts are included in this M1 category. - Demand Deposits: These are standard checking accounts maintained by commercial banks. They pay not interest on balances and as the name indicates, the funds can be withdrawn "on demand," which is accomplished by writing a check. This category also includes any travelers checks issued by commercial banks.
- Other Checkable Deposits at Banks: These are nonstandard "checking" accounts maintained by commercial banks, including NOW (negotiable orders of withdrawal) accounts or ATS (automatic transfer service) accounts. These accounts may or may not pay and interest and they may or may not be accessed by using paper checks, but they are used to make payments.
- Other Checkable Deposits at Thrifts: These are similar NOW and ATS accounts maintained by thrift institutions (credit unions, savings and loan associations, and mutual savings banks). Like those maintained by banks, they may or may not pay and interest and they may or may not be accessed by using paper checks, but they are used to make payments.
Travelers ChecksA third item also included in M1 is travelers checks issued by nonbank institutions. Travelers checks issued by banks are included under the demand deposit component of checkable deposits. This particular category includes travelers checks issued by other institutions, such as credit card companies (American Express, Visa, MasterCard). Nonbank travelers checks are less than one percent of M1.The Other TwoM1 is the narrow-range monetary aggregate. Two other monetary aggregates tracked by the Federal Reserve System are M2 and M3.- Medium-Range Money: M2: This is M1 plus the addition of highly liquid, savings-type near monies. The near monies added to M1 to obtain M2 include savings deposits, certificates of deposit, money market deposits, repurchase agreements, and Eurodollars. Some folks consider M2 a better overall measure of the economy's money supply than M1.
- Board-Range Money: M3: This is M2 plus the addition of several slightly less liquid, investment-type near monies. The near monies added to M2 to obtain M3 include larger denomination certificates of deposit, larger money market deposits, longer-term repurchase agreements, and longer-term Eurodollars.
Recommended Citation:M1, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2024. [Accessed: December 5, 2024]. Check Out These Related Terms... | | | | | | | | | Or For A Little Background... | | | | | | | | And For Further Study... | | | | | | | | | | Related Websites (Will Open in New Window)... | | | | |
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Today, you are likely to spend a great deal of time at a crowded estate auction looking to buy either a pair of blue silicon oven mitts or a coffee cup commemorating the 2000 Olympics. Be on the lookout for broken fingernail clippers. Your Complete Scope
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The first "Black Friday" on record, a friday marked by a major financial catastrophe, occurred on September 24, 1869 -- A FRIDAY -- when an attempted cornering of the gold market induced a financial crises and economy-wide depression.
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"Every man must decide whether he will walk in the light of creative altruism or in the darkness of destructive selfishness." -- Martin Luther King, Jr., clergyman
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BST Bulk Supply Tariff
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