It refers to the cash circulating outside the banking system plus corporate deposits, household savings deposits and other deposits. It includes all possible forms of purchasing power, usually reflecting changes in aggregate social demand and future inflationary pressure.
M2 calculation method =M1+ quasi-currency (unit time deposit + resident time deposit + other deposits + client margin of securities company + deposit of housing provident fund center + deposit of non-depositing financial institution in depositing financial institution);
M1() =M0(cash in circulation)+ demand deposits at the bank.
Broad money (M2) is a financial concept, reflecting an important indicator, usually reflecting the change of social aggregate demand and the pressure state of future inflation, and corresponding to narrow money.
In recent years, many countries have taken M2 as the target of money supply regulation.
M1 reflects the real purchasing power in the economy;
M2 not only reflects the real purchasing power, but also reflects the potential purchasing power.
If M2 is too high and M1 is too low, it indicates that investment is overheating, demand is not strong, and there is a crisis risk.
If M1 is too high and M2 is too low, it indicates strong demand and insufficient investment, and there is a risk of price increases.
