Q:

How do you calculate M2?

A:

Quick Answer

According Investopedia, M2 is a measure of money supply that includes M1 (cash and checking deposits) as well as near money (savings deposits, money market mutual funds and other interest-bearing deposits).

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Full Answer

Cash is the most liquid asset type and is measured by the M1 money supply. The next most liquid asset type is near money and is measured by the M2 money supply; this is capital that is not quite as liquid as cash but could be converted to cash quickly. The exact definition of M1 and M2 varies from country to country. Economists monitor both M1 and M2 closely, and their levels affect decisions made by central banks and other policy makers.

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