M1, M2, M3

M1, M2, and M3 are categories used to measure the money supply in an economy. M1 includes the most liquid forms of money, like cash, checking accounts, and traveler's checks—money you can access instantly. M2 adds to this savings accounts and small time deposits, which are slightly less liquid but still relatively accessible. M3 encompasses M2 plus large, long-term deposits and institutional money, representing broader measures of money that influence economic activity but are less readily available for everyday transactions. These categories help economists understand liquidity and potential spending in the economy.