Introduction
Cung tiền M2 refers to a measure of the money supply that includes both M1 (cash and demand deposits) and time deposits. It is an important concept in understanding the relationship between the money supply and inflation. In this article, we will explore the characteristics of Cung tiền M2 and its implications for the economy.
What is Cung tiền M2?
Cung tiền M2 is a broader measure of the money supply compared to Cung tiền M1. It includes M1 plus highly liquid assets that are not cash. While these assets are not typically used for daily transactions, they can easily be converted into cash. Examples of these assets include savings deposits and other time-related deposits.
Characteristics of Cung tiền M2
Due to the complexity of the monetary system and the diverse nature of economies, there are different ways to measure the money supply. The various measures are often denoted by the letter M, representing the different levels of liquidity. Currently, there are 4 measures of the money supply, with M0 being the narrowest and M3 being the broadest. Cung tiền M2 falls within the relatively broader range compared to narrower measures.
The Impact of Cung tiền M2 on Inflation
Cung tiền M2 plays a crucial role in forecasting economic issues such as inflation. Inflation and interest rates have a significant impact on overall economic conditions as they affect employment rates, consumer spending, business investments, currency strength, and trade balances. Central banks, as part of their mandate, strive to balance unemployment rates with inflation. To achieve this, they can manipulate the money supply, including Cung tiền M2.
Cung tiền M2 provides valuable insights into the direction and sentiment of the economy, as well as indications of the effectiveness of central bank policies. When there is growth in Cung tiền M2, it suggests that the economy is likely to expand in the near future. Conversely, when growth reaches a certain level, the economy may enter a recessionary phase, leading to a slowdown in Cung tiền M2. At this point, the central bank may implement expansionary monetary policies to stimulate the economy.
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(Based on information from Investopedia)
