How this instrument works
M1 and M2 are nested measures, not two separate totals: M2 does not recompute money from scratch, it takes M1 and layers on two slower-to-spend categories, savings deposits and small time deposits under $100,000. That nesting is why the formula for M2 literally starts with M1 rather than restating currency and demand deposits — each measure is defined as everything in the tier below it plus one more category the economics profession judges slightly less liquid.
Federal Reserve economists publish these figures weekly in the H.6 statistical release, and bond traders, macro strategists and financial journalists read the growth rate as an early signal of where inflation or monetary policy is heading. None of this describes a single household's finances — the inputs here are national totals in the trillions, standing in for every dollar of currency and every deposit account in the banking system, not one person's balance sheet.
The instrument deliberately limits itself to four inputs and leaves out institutional money-market funds, large time deposits, and repurchase agreements, all of which show up in broader aggregates the Fed no longer regularly publishes. It also uses the classic pre-2020 split, where savings deposits sit only inside M2; the Fed's own published M1 figure has counted savings deposits since a Regulation D change in May 2020, so comparing this M1 line against a live FRED chart should show a gap by design, not by error.
- Enter Currency in circulation, $ — physical notes and coins held outside bank vaults.
- Enter Demand deposits (checking accounts), $; the calculator adds the two into M1 money supply automatically.
- Enter Savings deposits, $ and Small time deposits (CDs under $100k), $ to extend the total toward M2.
- Read M1 money supply and M2 money supply in the results panel — M2 will never be smaller than M1.
Worked example — from $5 trillion in M1 to $16 trillion in M2
Set Currency in circulation, $ to $2,000,000,000,000 and Demand deposits (checking accounts), $ to $3,000,000,000,000. The calculator adds those two figures directly, so M1 money supply comes to $5,000,000,000,000 — five trillion dollars of currency and checking balances that could be spent within a single business day, the textbook definition of the most liquid tier of money.
Now add Savings deposits, $ of $10,000,000,000,000 and Small time deposits (CDs under $100k), $ of $1,000,000,000,000. Because M2 is defined as M1 plus those two slower categories, M2 money supply reaches $16,000,000,000,000, more than three times the M1 figure — a reminder that most of what economists count as money sits in accounts that take one extra step before it can be spent.
Questions
What is the difference between M1 and M2 money supply?
M1 counts only currency and demand deposits, money that can be spent immediately without moving it first. M2 adds savings deposits and small time deposits, balances that need an extra step, a transfer or a maturity date, before they convert to cash. M2 is therefore always the larger or equal figure of the two.
Does a growing M2 mean the Federal Reserve is printing money?
Rarely in the literal sense. Currency in circulation is only one input here; most of M2's growth comes from bank lending creating new demand and savings deposits, not from printed notes leaving a vault. Watch the currency line and the deposit lines separately and the distinction becomes visible.
Why might this M1 figure not match the Federal Reserve's published number?
In May 2020 the Fed changed Regulation D and began counting savings deposits inside its own published M1, so today's official figure already includes money this calculator keeps inside M2. This instrument uses the classic decomposition, currency plus demand deposits only, which is still how most economics courses present the split.
Who actually uses figures like these?
Federal Reserve staff publish them weekly in the H.6 statistical release; bond traders and macro analysts read the growth rate for early inflation signals, and policymakers cite it when explaining a tightening or easing decision. A household budget has no direct use for either number, since both describe the whole banking system, not one account.
Can M2 ever come out smaller than M1?
No, not with correctly entered figures. M2 is built by adding savings deposits and small time deposits on top of M1, so it can only equal M1, when both of those inputs are zero, or exceed it. A result showing M2 below M1 means an input was entered incorrectly.
What counts as a small time deposit here?
Certificates of deposit and similar time deposits held in accounts under $100,000, the retail-sized threshold the Federal Reserve has long used to separate ordinary savers from large institutional deposits, which are excluded from this measure of M2 entirely.
References
Read this first: This instrument shows arithmetic, not advice. Real offers add fees, taxes and terms that vary by lender and place — verify the figures against your actual paperwork before deciding anything.