money supply business definition

The amount of money in the economy. Since the money supply is considered by many to be a critical element in determining economic activity, the financial markets attach great importance to Federal Reserve reports of changes in the supply. For example, consistently large increases in the money supply bring fears of future inflation. There are a variety of measures of the supply of money, depending on how strictly it is defined. Also called money stock. See also M1, M2, M3, monetarism.