Money supply refers to which concept?

• A. The total value of financial assets in the economy that are considered money.
• B. The total value of goods and services produced in an economy.
• C. The total value of all bank assets.
• D. The monetary base only.

Answer: (A)

Money supply is the total value of financial assets that people actually use as money in everyday transactions and as a store of value. It includes currency in circulation and the deposits that can be quickly accessed for payments, plus other very liquid assets that can be readily converted to cash. This makes it a stock measure of the money available in the economy for spending and saving. It is not the total value of goods and services produced—that’s GDP. It isn’t simply all bank assets, which include many non-liquid items. And it isn’t just the monetary base, which only counts currency plus central-bank reserves and omits broader money-like deposits.