M0 {also known as the monetary base or high-powered money}, which is equal to the total liabilities of the central bank, that is, cash plus the reserves of private sector banks on deposit at the central bank; and M1 {also known as narrow money}, which is equal to cash in circulation plus demand or 'sight' deposits.
M0, referred to as the monetary base or high-powered money, encompasses the overall liabilities of the central bank, including both cash in circulation and the reserves held by private sector banks at the central bank. This measure reflects the most liquid form of money available in the economy.
M1, on the other hand, is known as narrow money. It consists of cash in circulation along with demand deposits, which are accessible for immediate withdrawal. This classification is vital for understanding the different layers of money supply and their implications for economic activity.
