What is currency supply?

Currency supply refers to the total amount of money available in an economy at a given time, including physical cash and digital money held in bank accounts. It encompasses various forms of money, such as coins, banknotes, and deposits, which can be categorized into measures like M1 (liquid cash) and M2 (M1 plus savings accounts and other near-money assets). Central banks manage currency supply through monetary policy tools to influence economic activity, control inflation, and stabilize the financial system. An increase in currency supply can stimulate growth, while a decrease may be used to combat inflation.