Money sounds like such a simple, obvious term. But it isn't. There is money you have in your wallet. What your great-grandfather called folding money. There is money in your bank account that doesn't become paper money until you take some out. There is money in the stock market, which grows or shrinks as trading prices rise or fall. That also happens to gold – and to commodities bought and sold, like coffee. Even the Fed has three terms for money with three different definitions.
M-1 is cash – money you can get at, in your wallet, in an ATM, in your checking account. M-2 is M-1 plus savings accounts. M-3 is M-2 plus other kinds of money that are harder to get at.
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