The money supply is all the money available in the United States economy. The money supply is divided into categories called M1 and M2. M1 is money that people can easily use to pay for goods and services, such as currency and deposits in checking accounts. These are assets that have liquidity, which means they can be used as cash or easily turned into cash. M2 consists of all the assets in M1 plus several other assets which have less liquidity, such as savings accounts and money market mutual funds. These are funds that pool money from small investors to purchase government or corporate bonds.

     The basic service banks provide is a safe way for people to store and save money. Banks offer savings accounts, checking accounts, money market accounts and certificates of deposit. Most of these accounts pay interest, the price paid for the use of borrowed money. Banks also provide loans, mortgages, and credit cards. A mortgage is a loan used for real estate. When banks lend money, they make a profit by charging interest. The borrower also has to repay the principal, the amount borrowed.

     Computers are rapidly changing the world of banking. Automated Teller Machines (ATMs) are computers that customers can use to deposit money, withdraw cash, and obtain information. Many people are starting to use the Internet to handle their finances. A growing number of financial institutions allow people to check account balances, transfer money between accounts, and pay their bills by computer.