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 |
Answer & explanation
Correct answer: option 2
The correct answer is Option 2: 2 - B
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