Monetary aggregates are a grouping of bank items according to the degree of decrease in the liquidity of funds in these accounts, i.e. by their ability to quickly turn into money. The faster the funds on the accounts go into monetary form, the more liquid the aggregate is. In Russia, when calculating the total money supply, four types of aggregates are used.
Instructions
Step 1
Aggregate М0 includes all types of money with a high degree of liquidity. To calculate this aggregate, you need to know the amount of cash and checks. Cash, in turn, includes banknotes and bargaining chips. A check is a document that is presented to the bank for payment and is used as a means of payment along with cash. Recently, plastic cards have been actively used instead of checks.
Step 2
To calculate the M1 aggregate, you must know not only the amount of cash and checks, but also the funds in the settlement and current bank accounts. Aggregate M1 can be represented as the sum of aggregate M0 and the amount of funds on bank accounts. It becomes clear that M1 is less liquid than M0, since the liquidity of bank accounts is less than the liquidity of cash.
Step 3
Please note that in addition to cash and funds in bank accounts, the money supply includes purchasing and means of payment, the liquidity of which is close to absolute. Such funds include promissory notes, certificates of deposit and bonds. Low-liquid funds in non-cash form are term bank deposits. Thus, the M2 unit is the sum of the M1 unit size and time deposits. Opening a term deposit, the client transfers funds to the bank for a certain time. Of course, the client can close it before the end date, but at the same time it will incur losses - the expected interest on the deposit will not be paid. Funds on fixed-term accounts make M2 unit less liquid than M1, and involve servicing savings and savings.
Step 4
To calculate the M3 aggregate, you need to know the M2 value and the volume of government securities. It is they who increase the M3 unit. Government securities cannot be called full-value money, but at the same time they can be converted into other types of money through their sale on the open market. That is why they are included in the money supply.
