M3 is the most commonly used measure of money supply. It is also known as aggregate monetary resources. Which of the following is not a component of M3?
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Savings deposits with Post Office savings banks.
M1 and M2 are known as narrow money. M3 and M4 are known as broad money. These measures are in decreasing order of liquidity. M1 is most liquid and easiest for transactions whereas M4 is least liquid of all. M3 is the most commonly used measure of money supply. It is also known as aggregate monetary resources.
M3 = M1 + Net time deposits of commercial banks
where M1 = CU + DD