What does the supply of money with respect to M2 Money Supply measure in the monetary component?

The M2 Money Supply is a broad measure of the money supply that includes cash, checking deposits, and easily convertible near money. It represents the total amount of money available in the economy at a given time. When discussing the availability of capital, M2 provides valuable insights because it captures not only physical cash but also funds that can be readily accessed for spending or investment.

An increase in M2 indicates that there is a higher availability of capital in the economy, which can influence spending, investment decisions, and overall economic activity. This is crucial for understanding liquidity in the financial system, as businesses and consumers rely on this capital to finance purchases and investments. Therefore, the correct answer reflects how M2 is indicative of the resources available to the economy for growth and stability.