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Target Exam

CUET

Subject

Economics

Chapter

Macro Economics: Money and Banking

Question:

Choose the correct pair:

1. C + DD + OD + Time deposits with commercial banks A. Money supply - M1
2. C + DD + OD + Saving deposits with post offices savings bank B. Money supply - M2
3. C + DD + OD + Total deposits of post offices savings bank C. Money supply - M3
4. C + DD + OD D. Money supply - M4

 

Options:

 1 - A

2 - B

3 - C

4 - D

Correct Answer:

2 - B

Explanation:

In India, there are 4 measures of money supply i.e. M1, M2, M3, and M4:

M1 - C + DD + OD (It is the narrow money) where C is the currency held by the public. DD is the net demand deposits of the bank. OD are other deposits with RBI.

M2 - M1 + Saving deposits with post offices savings bank

M3 - M1 + Net time deposits with commercial banks

M4 - M3 + Total time deposits with the post offices

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