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.

Narrow

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)