From currency in circulation and demand deposits, compute the money supply: cash plus demand deposits, measuring the immediately spendable money stock (M1).
Input Data
Results
At a glance:M1 money supply is the sum of currency in circulation and demand deposits, representing money immediately available for transactions.
Formula
moneySupply = currency + demandDeposits
$$M1 = Currency + DemandDeposits$$How to Use
- Enter the currency in circulation.
- Enter the demand deposits.
- Read the M1 money supply.
FAQ
What is the difference between M0, M1 and M2?
They are layers of the money supply, ordered by how broadly they count liquid assets — narrower layers are more liquid. M0 (the monetary base) is roughly currency in circulation plus bank reserves at the central bank. M1, which this tool computes, is currency in public hands plus demand deposits — money you can spend or pay with immediately. M2 adds 'near-money' such as time and savings deposits to M1. Some regions also report M3 with even broader, less liquid instruments. Use M1 to track transactional money and M2 for the overall money–economy relationship; note that exact definitions vary by jurisdiction.
Why does the money supply matter to the economy?
It measures how much 'money' is in the economy and is central to macro and monetary-policy analysis. Via the equation of exchange (MV = PQ), if money supply (M) grows faster than real output (Q) — with velocity (V) stable — prices (P) tend to rise, i.e. inflation; a contraction can suppress prices or cause deflation. More money also tends to lower interest rates and stimulate credit, investment and consumption, while too little can trigger a credit crunch. Central banks monitor it closely and use policy tools to steer it toward price stability and steady growth, though many now target interest rates directly and treat money supply as one observation among many.
How do banks 'create' money and expand the money supply?
Much of the increase is not from the central bank printing notes but from commercial banks creating deposits through lending under fractional reserves. Base money injected by the central bank becomes bank deposits; banks keep a fraction as reserves and lend the rest; borrowers spend it and the recipients redeposit it, creating new deposits the banks lend again — a loop that multiplies the original base money by the money multiplier (theoretical ceiling 1 ÷ reserve ratio). Each loan simultaneously creates an equal new deposit, which is the main component of M1 and M2. So when banks lend actively, the money supply grows; when they pull back, growth slows or reverses — which is why central-bank easing does not automatically expand supply if banks and borrowers hesitate.
Why is the growth rate of money supply more meaningful than the absolute figure?
A single snapshot like M1 = 1,000,000 tells you little on its own — its size depends on the economy's scale, units and historical accumulation, so you cannot call it good or bad. What matters is the change: the growth rate (usually year-on-year) and how it relates to economic growth and prices. If M grows persistently faster than real output Q, the excess tends to push up prices (inflation); if it grows too slowly or shrinks, that can signal credit tightening and recession risk. Analysts watch the level and trend of the growth rate, whether it runs faster or slower than nominal GDP, and any divergence between M1 and M2 growth (e.g. M1 growing far slower than M2 may mean funds are parking in time deposits rather than actively transacting). So read money supply by how it changes and relative to the economy, not by the headline number alone.
Why doesn't adding base money make M1 and M2 rise proportionally?
It is a common misconception that central-bank easing (more base money) instantly and proportionately lifts M1/M2. Between the two sits the gate of 'whether banks want to lend and borrowers want to borrow'. The central bank directly controls base money (M0), but broader money is mostly created by commercial banks lending and re-lending, amplified by the money multiplier — whose theoretical value is 1 ÷ reserve ratio, only a ceiling. In reality the multiplier is discounted: banks may hoard excess reserves when the outlook is poor or risks are high; businesses and households may not borrow even at low rates (you can lead a horse to water); and when the central bank pays interest on reserves, holding them becomes attractive. That is why in downturns massive easing can still leave M2 sluggish — the multiplier falls and the transmission is blocked. Money policy's effect depends on bank behaviour and market confidence, not the central bank alone.
References
Content review: Calculatorism Finance Team. Results are for reference only; please refer to the relevant authorities for the official figures.