Narrow Money Definition – Meaning | Formula | Example

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Narrow Money Definition With Example

Narrow Money Definition – The sum of physical currency held with the public and the demand deposits and liquid assets of public held with commercial banks.

It is known as M1 in short. This is the most readily available money in the economy. It consists of paper currency, coins and the deposits kept by the public in the banks. Furthermore, it consists of the most liquid form of the money. The most important feature of narrow money is that it is accessible in demand. Hence it consists of those liquid assets which are readily available for purchase the commodities or various items.

Examples of Narrow Money

To get a better understanding of the Narrow money definition, look at the items that covers under it.

  • Coins, Paper currency or the legal tender currency that the general public held with itself in the economy.
  • Demand deposits of the public with the bank, debit card transactions and cheques are included in it

Related Financial Terms of Narrow Money

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