M1 and M2 Money Supply

M1 and M2 are measures of the money circulating in the economy. M1 includes the most liquid forms, such as cash, checking account deposits, and traveler's checks—funds that are easily accessible for spending. M2 includes everything in M1 plus less liquid savings accounts, money market securities, and small-time deposits—funds that can be quickly converted to cash but aren't as immediately accessible. Essentially, M1 reflects readily spendable money, while M2 offers a broader view of the total money supply, including savings that can be accessed relatively easily.