Drag each asset into the correct money aggregate. M1 is the most liquid (currency + checking). M2 includes M1 plus near-money like CDs and money market funds.
Items to sort
M1 (only)
M2 (only)
Excluded
Liquidity rule of thumb
M1 includes assets you can spend INSTANTLY (currency, checking, savings). M2 adds CDs and money market funds — quickly convertible but with mild restrictions. Stocks, bonds, and real estate are NOT money — they're financial assets.
Adjust the reserve ratio (rr) and currency-deposit ratio (cr) to see how the money multiplier responds.
multiplier = (1 + cr) / (rr + cr)
10%
0%
$1,000
Money multiplier
10.00
Money supply M
$10,000B
Currency in circulation
$0B
Total deposits
$10,000B
Total reserves
$1,000B
What changes the multiplier
rr ↑ (banks must hold more reserves) → multiplier ↓ cr ↑ (people hold more cash) → multiplier ↓ (less stays in banks to lend)
Banking panics raise both — the 1930s collapse cut the multiplier dramatically.
Trace a fresh deposit through 8 rounds of fractional-reserve banking. Adjust rr and watch how money compounds.
10%
$1,000
Final M (geometric sum)
$10,000
Theoretical multiplier
10.00
Money created (M − initial)
$9,000
Concept check
After many rounds, total deposits = initial / rr (geometric series with ratio (1 - rr)). Setting rr = 0.10 gives exactly 10× the initial deposit. Higher rr → less money creation → smaller multiplier.