The table below gives M1 and M3 in India (Rs crore).
| Year | M1 | M3 |
|---|---|---|
| 2019-20 | 41,25,948 | 1,67,99,963 |
| 2020-21 | 47,94,299 | 1,88,44,578 |
| 2021-22 | 53,07,125 | 2,04,93,129 |
| 2022-23 | 56,74,795 | 2,23,43,760 |
| 2023-24 | 60,91,700 | 2,49,39,860 |
| 2024-25 | 65,84,081 | 2,72,86,589 |
Consider the following statements:
(A) Both M1 and M3 rose in every year shown.
(B) In every year shown, M3 was more than three times M1.
(C) The difference between M3 and M1 is attributable to the time deposits held by commercial banks.
(D) In 2024-25, M1 was more than half of M3.
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → (A), (B) and (C) only
(A) Both M1 and M3 rose in every year shown. — Correct. Each figure is larger than the one above it in both columns.
(B) In every year shown, M3 was more than three times M1. — Correct. M3 ÷ M1 is about 4.1, 3.9, 3.9, 3.9, 4.1 and 4.1. Each ratio is above 3.
(C) The difference between M3 and M1 is attributable to the time deposits held by commercial banks. — Correct. M3 = M1 + net time deposits of commercial banks.
(D) In 2024-25, M1 was more than half of M3. — Incorrect. Half of 2,72,86,589 is about 1,36,43,295. M1 was only 65,84,081, about one-fourth of M3.
NCERT (2026-27): “Legal Definitions: Narrow and Broad Money … They are defined as follows “Table 3.4: Changes in M1 and M3 Over Time (in crore) (2023-24) … The difference in values between the two columns is attributable to the time deposits held by commercial banks.” |