Broad money refers to:
Broad money is a term used in economics to refer to the total supply of money in an economy. It encompasses various types of money, including both physical currency and deposits held in financial institutions. In the United States, the measure of broad money is typically referred to as M3.
The components of broad money include:
- M1: M1 is a narrow definition of money that includes physical currency (coins and banknotes) held by individuals and businesses, as well as demand deposits held in banks. It represents the most liquid form of money.
- M2: M2 includes all the components of M1, but also adds certain types of savings deposits, such as money market deposits and retail money market mutual funds. These types of deposits are less liquid than M1 but can still be readily converted into cash or used for transactional purposes.
- M3: M3 is a broader measure of money that includes M2 plus large time deposits, institutional money market funds, and other types of relatively less liquid financial assets. M3 is considered to be the most comprehensive measure of the money supply and includes a wider range of financial instruments.
- M4: M4 is an even broader measure of money that includes M3 plus additional financial assets, such as repurchase agreements and debt securities. M4 is less commonly used and is not as widely recognized as M1, M2, and M3.
In summary:
- Broad money refers to the total supply of money in an economy.
- It includes various types of money, such as physical currency and deposits held in financial institutions.
- The components of broad money include M1, M2, M3, and sometimes M4.
- M1 is the most liquid form of money, while M3 is the most comprehensive measure of the money supply.
Therefore, the correct answer to the question is C: M3.