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21 February, 16:25

The federal reserve uses two definitions of money supply, M1 and M2, because ...

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  1. 21 February, 18:32
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    The Federal Reserve tracks and measures the money supply. They break it down into M1 ("liquid" money that is more easily accessible such as checking accounts and cash) and M2 (less liquid/accessible money such as money markets, savings, mutual funds) in order to more accurately track the money supply.

    Accurately tracking the supply of money is important because it is closely tied to inflation and the strength of the economy.
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