BROAD MONEY Meaning and
Definition
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Broad money refers to the total amount of money circulating within an economy that is readily accessible to individuals, businesses, and institutions for conducting transactions. It includes both physical currency, such as coins and banknotes, held by the non-banking public, as well as various forms of electronic money held in bank accounts. Broad money is a broader measurement of money supply as compared to narrow money or M1, which only includes the most liquid forms of money.
Some of the components of broad money include currency in circulation, which refers to physical money held by the public, demand deposits held in commercial banks, and other forms of deposits such as time deposits and savings accounts. It also includes non-bank financial institutions' deposits with monetary authorities and deposits held by central government and local government entities.
Broad money encompasses all the funds that are considered as means of payment or store of value, used for day-to-day transactions as well as for savings purposes. It provides a measure of liquidity and reflects the availability of funds for spending, investment, and credit creation within an economy. Central banks and economists closely monitor the growth of broad money as it is an important indicator of the overall health and stability of an economy, as excessive growth can be inflationary while a decline can indicate economic contraction.
Common Misspellings for BROAD MONEY
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Etymology of BROAD MONEY
The term "broad money" is derived from the combination of two words: "broad" and "money".
The word "money" traces back to Latin, where "moneta" referred to a place where coins were minted. This evolved into "moneta" in Old French, which meant "coin" or "money". Eventually, it entered English as "money" referring to the medium of exchange used in transactions.
The word "broad" has Old English origins. It originally meant "wide" or "spacious". Over time, it also came to represent something that encompasses a wide range or includes many different things.
When combined, the term "broad money" is used in economics to describe a measure of the total amount of money in an economy that includes physical currency (coins and banknotes) and various forms of deposits, such as checking accounts, savings accounts, and other easily accessible money.
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