There are four alternative measures of money supply.
M1 (M1 Money) = CU + DD
M2 = M1 + Savings deposits with Post Office saving bank
CU= Currency (notes plus coins)
DD = Net demand deposits
M1 and M2 are known as __________ Money.
Answer & explanation
Correct answer: option 1
The correct answer is option (1) : Narrow
Narrow money refers to a category of money supply that includes all the real money held by the central bank. It includes coins and currency, demand deposits, and other liquid assets.
M3 and M4 are known as broad money.
M3 = M1 + Net time deposits of commercial banks
M4 = M3 + Total deposits with Post Office savings organisations (excluding National Savings Certificates)