Money supply is defined as?

Money supply is defined as?

• A. The total value of financial assets in the economy that are considered money.
• B. Only currency in circulation.
• C. The rate at which money circulates.
• D. The sum of foreign exchange holdings.

Answer: (A)

Money supply is the total stock of monetary assets that are accepted as payment in the economy. It captures all forms of money people can use to buy goods and services, not just coins and bills but also liquid deposits and other near-money assets that function as money in practice. That’s why the correct description is the broad total value of financial assets considered money. Why the other ideas don’t fit as well: currency in circulation is only part of money supply, missing deposits and other liquid assets. The rate money circulates is the velocity of money, not how much money exists. Foreign exchange holdings are assets held for trade or investment, not the overall money actually available for transactions in the economy.

Money supply is the total stock of monetary assets that are accepted as payment in the economy. It captures all forms of money people can use to buy goods and services, not just coins and bills but also liquid deposits and other near-money assets that function as money in practice. That’s why the correct description is the broad total value of financial assets considered money.

Why the other ideas don’t fit as well: currency in circulation is only part of money supply, missing deposits and other liquid assets. The rate money circulates is the velocity of money, not how much money exists. Foreign exchange holdings are assets held for trade or investment, not the overall money actually available for transactions in the economy.