There are two terms of money M1 and M2. M2 is measure of money supply that contain all components of M1 as well as near money. The M1 include checking deposits and cash while near money include money market securities, saving deposits, time deposits and mutual funds. All elements of near money are less liquid than M1, but they can be quickly converted into checking deposits or cash. M2 is broader measure of money supply that is closely watched indicator of future inflation, money supply and target of central bank monetary policy.
Due to diverse size and level of economies, measuring the supply of money in any economy is a great challenge. There are various means of measuring money supply typically classified as M0, M1, M2 and M3, but M2 is considered fairly broad measure, because it contain resources that are highly liquid but not cash. The M2 is critical factor in predicting the problems like inflation. The interest rate and inflation have main consequence for general economy, as these deeply effect consumer spending, employment, trade balance, and currency strength and business investment. In United State of America, the Federal Reserve issues data of money supply on each Thursday usually at 4:30 PM that only covers M1 and M2. The data of large time deposits such as large liquid assets and institutional market funds are issued on quarterly basis which covers M3 money supply measurement.
The US Federal Reserve dual directive is to balance inflation and unemployment. M2 money supply measurement provide awareness into the direction, boundary and effectiveness of central bank monetary policy. The M2 has grown-up with the economy, increasing from $4.6 trillion in January 2014 to $14.5 trillion in January 2019. The money supply never shortened at any time during this period. The most extreme economic growth occur in September 2001, January 2009 and January 2012.