ECON 110 Money Classifications

• Currency held outside banks. 

• Notes issued by the FED.

• Coins issued by the U. S. Treasury.

• Demand deposits. 

• Checkable deposit convertible into currency on demand.

• Traveler’s checks. 

• A bank check convertible into currency on demand.

• Other checkable deposits. 

• Negotiable Order of Withdraw (NOW) Accounts.
  • (The official name of a checking account.)

• Automatic transfer savings account.
  • A checkable deposit the balance on which is maintained at an agreed level by transferring funds from a savings account.
  • Used by commercial banks, S&L’s, and credit unions.

Note: These accounts are used primarily as a medium of exchange...i.e. for transactions. 

• M1 

• See previous page.

• Savings deposits.

• A deposit that technically can not be withdrawn on demand, but in practice can be instantly withdrawn.

• Small time deposits.

• A deposit with a fixed term to maturity.  (Example: a certificate of deposit.)
  • Deposits of $100,000 or less are considered to be small. 

• Eurodollar deposits. 

• U. S. dollar accounts in banks in other countries.

• Money market mutual funds held by individuals. 

• A financial intermediary that obtains funds by issuing shares on which checks may be drawn.

• Money market deposit accounts.

• Liquid savings accounts paying moneymarket interest rates.

• Overnight repurchase agreements. 

• Overnight eurodollars. 

Note:  A broader measure.  The money in the non-M1component is used primarily as a store of value.  These funds can be     transferred to a transaction account. 

• M2

• See previous description.

• Large time deposits.

• A deposit with a fixed term to maturity.  (Example:  Certificate of deposit.) 
  • Deposits of $100,000 or more are considered to be large.

• Eurodollar time deposits.

• U. S. dollar accounts in banks inother countries, mainly in Europe,that have a fixed term to warranty.

• Money market mutual fund shares held by institutions.

• Example:  Money market fund held by large insurance companies.

• Term repurchase agreements.

• Repurchase agreements other than overnight agreements.

Note:  This is the largest measure of money.  It is generally used by large business and financial institutions. 

Note:  L has not served as a target for monetary policy, in part because data are not available a month later than data  on  the M’s, and also because  its components are less  influenced by Federal Reserve policy.