Measures of the total amount of money circulating in an economy. M1 includes physical money and checking deposits;M2 includes M1 plus savings accounts and time deposits.

The measures of the total amount of money circulating in an economy are known as monetary aggregates. M1 and M2 are two commonly used measures.<br /><br />M1 includes the most liquid forms of money, such as physical currency (coins and bills) and checking deposits (demand deposits) that can be easily used for transactions.<br /><br />M2 includes M1 plus other forms of money that are slightly less liquid, such as savings accounts and time deposits. These forms of money are still considered part of the money supply, but they are not as readily available for immediate transactions as M1 components.<br /><br />In summary, M1 includes physical money and checking deposits, while M2 includes M1 plus savings accounts and time deposits.