monetary aggregates (M0, M1, M2)
/ em-zero, em-one, em-two /
Money is not one tidy thing. The notes in your pocket are obviously money; the balance in your checking account is money too, since you can spend it instantly; the cash locked in a one-year savings deposit is sort of money — yours, but not spendable today. Because money shades from 'instantly spendable' to 'tied up', statisticians count it in concentric rings called monetary aggregates, usually labelled M0, M1, M2, and sometimes M3.
Think of nested circles, narrowest first. M0, often called the monetary base or 'narrow money', is the most liquid: physical cash in circulation plus banks' reserves at the central bank. M1 widens the circle to cash held by the public plus checkable bank deposits — money you can spend right now without penalty. M2 widens further, adding less-liquid savings: ordinary savings accounts, small time deposits, and money market funds — money that is yours but takes a step to spend. Each ring contains the one inside it, so M2 is bigger than M1, which is bigger than the public's cash. A toy example: if cash held by the public is $50bn, checking deposits add $200bn (so M1 = $250bn), and savings deposits add another $400bn, then M2 = $650bn.
These layers matter because different rings tell economists different things. Narrow money tracks what is immediately available to spend; broader money captures savings that could be mobilised. Central banks and analysts watch how the aggregates grow to gauge whether spending power is building up. One caveat: the exact definitions differ by country and change over time as new financial products blur the lines (where do digital wallets or crypto sit?), so M2 in one nation is not strictly comparable to M2 in another.
Your $40 cash and $3,000 checking balance both count in M1 because you can spend them now. Your $10,000 in a savings account counts in the broader M2 but not M1 — it is your money, yet you'd transfer it to checking before spending. The two ring sizes describe the same wallet at different zoom levels.
M0 ⊂ M1 ⊂ M2: each aggregate nests inside the next, adding less-liquid money.
Don't read too much precision into the labels. The dividing lines (which deposits count as M1 versus M2) are conventions that vary by country and get revised; some central banks have even discontinued certain aggregates. They are useful guides, not laws of nature.