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Simple English definitions for legal terms
M3
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A quick definition of M3:
Term: M3
Definition: M3 is a way to measure how much money is in circulation in an economy. It includes all the things that are part of M2 (like cash, checking accounts, and savings accounts), plus some other things like big deposits that people and companies make in banks, and money that is invested in special funds called money-market funds. Basically, M3 is a way to keep track of all the money that is available for people and businesses to use.
A more thorough explanation:
M3
M3 is a measure of the money supply that includes all the items in M2, such as cash, checking accounts, and savings accounts, plus large time deposits and money-market funds held by institutions.
- A large corporation has $10 million in a money-market fund. This amount is included in M3.
- A pension fund has $50 million in a long-term time deposit. This amount is also included in M3.
These examples illustrate how M3 includes not only the money that individuals and businesses hold in their bank accounts but also the money that institutions hold in large time deposits and money-market funds. This broader measure of the money supply can provide a more accurate picture of the overall liquidity of the economy.