M1 Money Supply
Plain definition
The narrowest common measure of the money supply: physical currency in circulation plus checkable (demand) deposits and other highly liquid deposits.
In economics
M1 counts money immediately usable for transactions. It is the most liquid measure, so it best captures money's medium-of-exchange role. Central banks and analysts watch M1 growth because rapid growth can signal future inflationary pressure, though velocity changes complicate the link.
Example
If a country's cash in circulation is 5 trillion, M1 is $7 trillion. When the central bank buys government bonds from banks, new reserves let banks expand checkable deposits, increasing M1.
M1 is confused with M2 and with the monetary base. M1 is narrower than M2 (it excludes savings deposits and money market funds) but broader than the monetary base (it includes demand deposits, not just currency and reserves). Moving money from savings to checking raises M1 but leaves M2 unchanged.