EconomicsMacro Economics: Money and Banking

Three of the following measures of money supply include the net time…

Three of the following measures of money supply include the net time deposits of commercial banks. Which one is the odd one out?

Answer & explanation

Correct answer: option 2

The correct answer is Option (2) → M2

M2 adds only savings deposits with Post Office savings banks to M1. It has no time deposits of commercial banks.

M3 is M1 plus net time deposits of commercial banks. M4 is built on M3, so it carries them too. Aggregate monetary resources is another name for M3.

NCERT (2026-27): “Legal Definitions: Narrow and Broad Money … RBI publishes figures for four alternative measures of money supply, viz. M1, M2, M3 and M4. They are defined as follows
M1 = CU + DD
M2 = M1 + Savings deposits with Post Office savings banks
M3 = M1 + Net time deposits of commercial banks
M4 = M3 + Total deposits with Post Office savings organisations (excluding National Savings Certificates)
where, CU is currency (notes plus coins) held by the public and DD is net demand deposits held by commercial banks.”

Glossary: “Aggregate monetary resources – Broad money without time deposits of post office savings organisation (M3).”