M3 is the broadest measure of money supply in circulation and includes all other money measures plus time deposits, savings deposits, and money market mutual funds. The Basics of Calculate M3 (M3 berekenen) are not too difficult to understand. Here is a brief explanation.
M3 is calculated by adding M1 (which consists of currency held by the public, traveler’s checks, demand deposits, and other checkable deposits) with M2 (which consists of M1 plus savings deposits, small-denomination time deposits, and retail money market mutual funds).
To calculate the Money Supply M3:
First calculate M1 = Currency + Traveler’s Checks + Demand Deposits + Other Checkable Deposits
Then calculate M2 = M1 + Savings Deposits + Small Denomination Time Deposits + Retail Money Market Mutual Funds
And finally, calculate M3 = M2 + Large Denomination Time Deposits + Institutional Money Market Mutual Funds + Eurodollars.
Currency in circulation refers to notes and coins issued by the central bank and circulated within an economy. It does not include foreign currency held by residents or nonresidents.
Traveler’s checks are a type of currency that can be used in place of cash when traveling. They can be purchased from banks or other financial institutions and are typically used for international travel.
Demand deposits are funds deposited into checking accounts that can be withdrawn on demand without notice or penalty.
Other checkable deposits include negotiable order of withdrawal accounts, automatic transfer service accounts, and credit union share draft accounts.
Savings deposits are funds deposited into savings accounts that cannot be withdrawn on demand without notice or penalty. They typically earn interest at a higher rate than checking accounts but have lower liquidity.
Small-denomination time deposits are certificates of deposit with maturities of less than $100,000 that have been issued by depository institutions in denominations of less than $100,000.
Retail money market mutual funds are mutual funds that invest in short-term debt securities with maturities of less than one year and are available to retail investors.
Large-denomination time deposits are certificates of deposit with maturities of $100,000 or more that have been issued by depository institutions in denominations of $100,000 or more.
Institutional money market mutual funds are mutual funds that invest in short-term debt securities with maturities of less than one year and are available to institutional investors such as banks, insurance companies, and pension funds.
Eurodollars are U.S.-dollar-denominated deposits held at foreign banks or foreign branches of U.S. banks outside the United States.
Now you know the basics of how to calculate the Money Supply M3! Be sure to stay up to date on changes in the monetary system so you can better understand how it might affect your finances!
M3 is the standard measure of money supply in the United States. It includes currency in circulation, demand deposits, savings deposits, and money market mutual funds. M3 is sometimes referred to as “broad money” because it encompasses such a wide variety of financial instruments. Central bankers and policy makers use M3 to gauge the health of the economy and make monetary policy decisions.