Monetary economists hold different views regarding the constituents of money supply. Broadly, there are two views: the traditional view and the modern view.
1. Traditional View:
According to the traditional view, money supply is composed of (a) currency money and legal tender, i. e., coins and currency notes, and (b) bank money, i.e., chequable demand deposits with the commercial banks
2. Modern View:
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According to the modem view, the phenomenon of money supply refers to the whole spectrum of liquidity in the asset portfolio of the individual.
Thus, in the modem approach, money supply is wider concept which includes (a) coins, (b) currency notes, (c) demand deposits with the banks, (d) time deposits with the banks, (e) financial assets, such as deposits with the non-banking financial intermediaries, like the post-office saving banks, building societies, etc., (f) treasury and exchange bills, (g) bonds and equities.
The basic difference between the traditional and modern views is due to their emphasis on the medium of exchange function of. Money and the stock of value function of money respectively.
While the acceptance of medium of exchange function of money supply gives a narrow view of money supply, the recognition of the store of value function of money provides a broader concept of money supply and allows for the substitutability between money (which is traditionally defined as a medium of exchange) and the whole spectrum of financial assets.