Money Supply

Population’s spending power represented by the quantity of liquid assets (usually cash) in an economy that can be exchanged for goods and services. Increase in money supply (relative to the output of goods and services) leads to inflation, higher employment, and high utilization of the manufacturing capacity. Its decrease leads to deflation, unemployment, and idle manufacturing capacity. It can have different meanings depending on the degree of liquidity chosen to define an asset as money. Measures of money supply (called monetary aggregates) have different criteria in different countries, and are categorized from the narrowest to the broadest.

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