Children learn from watching you earn, shop, save, and borrow – you happen to be the leading influence on their monetary lives. Modern monetary theory distinguishes amongst various methods to measure the money provide, reflected in distinctive kinds of monetary aggregates, using a categorization method that focuses on the liquidity of the economic instrument utilized as money. Citation required The most important functions of money are distinguished as: a medium of exchange a unit of account a shop of value and, sometimes, a normal of deferred payment 4 five Any item or verifiable record that fulfills these functions can be regarded as money. These economic instruments collectively are collectively referred to as the money supply of an economy.
The most generally utilized monetary aggregates (or forms of money) are conventionally designated M1, M2 and M3. These are successively bigger aggregate categories: M1 is currency (coins and bills) plus demand deposits (such as checking accounts) M2 is M1 plus savings accounts and time deposits beneath $100,000 and M3 is M2 plus bigger time deposits and similar institutional accounts.