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Which of the following about money supply measure adopted in 1977 is correct?
- a)M2= M1 +demand deposits with post offices
- b)M3= M1 +term deposits with banks
- c)M4= M3+total deposits with post offices
- d)All the above
Correct answer is option 'D'. Can you explain this answer?
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Which of the following about money supply measure adopted in 1977 is c...
These are the measures of money supply adopted by RBI in 1977.
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Which of the following about money supply measure adopted in 1977 is c...
Money Supply Measures Adopted in 1977
In 1977, the Reserve Bank of India (RBI) introduced new measures to define and measure money supply in the Indian economy. These measures are known as M1, M2, M3, and M4. Let's explore each of these measures in detail:
M1: M1 represents the narrowest definition of money supply and includes the most liquid forms of money. It includes currency notes and coins in circulation, as well as demand deposits held by the public in commercial banks. However, after the adoption of the 1977 measures, M1 also includes demand deposits with post offices. Therefore, option 'a' is correct.
M2: M2 is a broader measure of money supply and includes all components of M1. In addition to M1, M2 also includes savings deposits with commercial banks. Therefore, option 'b' is incorrect as term deposits with banks are not included in M1 or M2.
M3: M3 is an even broader measure of money supply and includes all components of M2. In addition to M2, M3 also includes time deposits with banks. Therefore, option 'c' is incorrect as total deposits with post offices are not included in M3.
M4: M4 is the broadest measure of money supply and includes all components of M3. In addition to M3, M4 also includes deposits with non-banking financial intermediaries, such as non-banking financial companies (NBFCs). Therefore, option 'd' is correct as it includes all the above-mentioned components of money supply.
To summarize, the correct option is 'd' - all the above. M1 includes demand deposits with post offices, M2 includes savings deposits with commercial banks, and M4 includes total deposits with post offices and non-banking financial intermediaries.
In 1977, the Reserve Bank of India (RBI) introduced new measures to define and measure money supply in the Indian economy. These measures are known as M1, M2, M3, and M4. Let's explore each of these measures in detail:
M1: M1 represents the narrowest definition of money supply and includes the most liquid forms of money. It includes currency notes and coins in circulation, as well as demand deposits held by the public in commercial banks. However, after the adoption of the 1977 measures, M1 also includes demand deposits with post offices. Therefore, option 'a' is correct.
M2: M2 is a broader measure of money supply and includes all components of M1. In addition to M1, M2 also includes savings deposits with commercial banks. Therefore, option 'b' is incorrect as term deposits with banks are not included in M1 or M2.
M3: M3 is an even broader measure of money supply and includes all components of M2. In addition to M2, M3 also includes time deposits with banks. Therefore, option 'c' is incorrect as total deposits with post offices are not included in M3.
M4: M4 is the broadest measure of money supply and includes all components of M3. In addition to M3, M4 also includes deposits with non-banking financial intermediaries, such as non-banking financial companies (NBFCs). Therefore, option 'd' is correct as it includes all the above-mentioned components of money supply.
To summarize, the correct option is 'd' - all the above. M1 includes demand deposits with post offices, M2 includes savings deposits with commercial banks, and M4 includes total deposits with post offices and non-banking financial intermediaries.
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Which of the following about money supply measure adopted in 1977 is correct?a)M2= M1 +demand deposits with post officesb)M3= M1 +term deposits with banksc)M4= M3+total deposits with post officesd)All the aboveCorrect answer is option 'D'. Can you explain this answer?
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