Match List-I with List-IIList-IList-II(A)M1(I)CU + DD(B)M2(II)M1 + Sa…

The correct answer is Option (1) → (A) – (I), (B) – (II), (C) – (III), (D) – (IV)

The money supply is the total stock of money in circulation among the public at a particular point of time. Some of it can be spent at once and some is tied up in deposits, so the RBI measures it in four ways, M1 to M4, each adding one more kind of deposit to a narrower measure. They run in decreasing order of liquidity: M1 is the most liquid and M4 the least.

(A) M1 — this matches (I) CU + DD. M1 is currency (notes and coins) held by the public plus net demand deposits held by commercial banks, the money that can be spent at once.

(B) M2 — this matches (II) M1 + Savings deposits with Post Office savings banks. M2 adds to M1 the savings deposits of the public with post office savings banks.

(C) M3 — this matches (III) M1 + Net time deposits of commercial banks. M3 adds to M1 the net time (fixed) deposits of commercial banks. It is the most commonly used measure of money supply.

(D) M4 — this matches (IV) M3 + Total deposits with Post Office savings organisations (excluding National Savings Certificates). M4 is the widest measure: M3 plus all deposits with post office savings organisations, excluding National Savings Certificates.

Note: A same/similar question was asked in CUET (UG) in the papers below.

* A similar question.