M0 is the money in the pocket of ordinary people, and M 1 is the money in the pocket+current deposit. To put it bluntly, it is money that ordinary people can consume immediately. If M0 has money in his pocket, he is willing to spend it. Then consumption will increase, currency circulation will increase, all walks of life will develop in a good direction, wages will increase and income will increase.
The decline of M 1 means that there is no money to spend, and not spending naturally means the decline of product prices. Behind the rapid growth of M 1, there is generally the shadow of the loose policy of the central mother. People are usually more willing to spend more money. When m2 money increases, it means that the money supply of society increases, which will lead to inflation to some extent. The general rise in social prices has reduced the purchasing power or potential purchasing power of residents, making money even less valuable.
The related introduction of M2
M2 not only reflects the actual purchasing power, but also reflects the potential purchasing power. The liquidity is weak, but it reflects the change of total social demand and the pressure of future inflation. Money supply usually refers to M2. There are two channels for putting money into circulation: one is foreign exchange, and the other is putting money through bank credit. The faster they are put into circulation, the greater the growth rate of M2.
Generally, the macro-economic operation can be revealed by the change of the growth rate of M 1 and M2, and it is of great analytical significance to compare the growth rates of M2 and M 1. If the growth rate of M 1 is higher than the growth rate of M2 for a long time, it shows that the economy is expanding rapidly and other types of assets other than demand deposits have higher returns.