DEFINITION of 'M0'

A measure of the money supply which combines any liquid or cash assets held within a central bank and the amount of physical currency circulating in the economy. In the United Kingdom, the M0 supply is also referred to as narrow money.
INVESTOPEDIA EXPLAINS 'M0'

M0 (M-zero) is the most liquid measure of the money supply. It only includes cash or assets that could quickly be converted into currency. This measure is known as narrow money because it is the smallest measure of the money supply.



DEFINITION of 'M1'

A measure of the money supply that includes all physical money, such as coins and currency, as well as demand deposits, checking accounts and Negotiable Order of Withdrawal (NOW) accounts. M1 measures the most liquid components of the money supply, as it contains cash and assets that can quickly be converted to currency. It does not contain "near money" or "near, near money" as M2 and M3 do.
INVESTOPEDIA EXPLAINS 'M1'

M1 as a definition of a country’s money supply focuses on money's role as an exchange medium. A customer paying for groceries can use coins, paper currency or write a check. All of these payment methods are part of M1. Demand deposits and checking accounts have become increasingly popular as an exchange medium with the advent of ATMs and debit cards.
M1 is the most narrowly defined component of the money supply and does not include financial assets such as savings accounts. Economists use it to quantify the amount of money in circulation.


DEFINITION of 'M2'

A measure of money supply that includes cash and checking deposits (M1) as well as near money. “Near money" in M2 includes savings deposits, money market mutual funds and other time deposits, which are less liquid and not as suitable as exchange mediums but can be quickly converted into cash or checking deposits.

INVESTOPEDIA EXPLAINS 'M2'

M2 is a broader money classification than M1, because it includes assets that are highly liquid but not cash. A consumer or business typically won’t use savings deposits and other non-M1 components of M2 when making purchases or paying bills, but it could convert them to cash in relatively short order.
M1 and M2 are closely related, and economists like to include the more broadly defined definition for M2 when discussing the money supply, because modern economies often involve transfers between different account types. For example, a business may transfer $10,000 from a money market account to its checking account. This transfer would increase M1, which doesn’t include money market funds, while keeping M2 stable, since M2 contains money market accounts.