Currency In Circulation

Currency that is physically used to conduct transactions between consumers and businesses rather than stored in a bank, financial institution or central bank. Currency in circulation is part of the overall money supply, with a larger portion of the overall supply being stored in checking and savings accounts.

Currency in circulation can be thought of as "currency in hand", meaning that it is used to buy goods and services. Central banks pay attention to the amount of physical currency in circulation because it is present in the most liquid asset class. The more money that comes out of circulation and into longer-term investments, the less money is available to fund shorter-term consumption - a major component of GDP.

Investment dictionary. . 2012.

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