What is the term for the money supply, which includes physical cash and demand deposits?

The term for the money supply that encompasses physical cash and demand deposits is monetary policy. Monetary policy refers to the actions and strategies implemented by a central bank, such as the Federal Reserve in the United States, to regulate the money supply and achieve macroeconomic objectives like controlling inflation, managing employment levels, and ensuring economic stability.

Money supply includes not just the physical cash in circulation but also demand deposits, which are the funds held in bank accounts that can be accessed quickly, highlighting the liquidity available in the economy. Understanding this term is essential as it illustrates how financial institutions and government entities influence economic conditions through the management of the money supply.

The other options, while related to finance and economics, are distinct concepts. Fiscal policy pertains to government spending and taxation decisions to influence the economy, liquidity describes the ease with which assets can be converted into cash, and capital refers to financial assets or resources that can be used to fund investments or expenditures.