M1, M2, M3, and M4 are different measures of money supply that are used to track the amount of money in circulation in an economy. The measures are classified based on the level of liquidity of the assets included in each measure. The measures are defined as follows:
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M0 (Reserve Money): It is the narrowest measure of money supply and includes the total amount of currency in circulation, plus the current amount of central bank reserves.
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M1 (Narrow Money): It includes M0 and other highly liquid deposits in the bank, such as demand deposits.
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M2: It includes M1 plus marketable securities and less liquid deposits, such as short-term time deposits in banks and money market funds.
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M3 (Broad Money): It includes M2 and money market funds like mutual funds, repurchase agreements, commercial papers, and long-term deposits in banks.
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M4: It includes M3 and all other least liquid assets, usually outside commercial banks.
The measures of money supply vary depending on the country, and some countries may use different measures than those listed above. For example, the United States uses M1, M2, and M3, while India uses M0, M1, M2, M3, and M4.
