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The basic distinction between narrow and broad monies is the
- a)Treatment of post office deposits.
- b)Treatment of time deposits of banks.
- c)Treatment of savings deposits of banks.
- d)Treatment of currency.
Correct answer is option 'B'. Can you explain this answer?
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Most Upvoted Answer
The basic distinction between narrow and broad monies is thea)Treatmen...
The basic distinction between narrow and broad monies is the treatment of time deposits of banks.
Explanation:
- Narrow money refers to the most liquid forms of money that are readily available for transactions. It includes currency in circulation and demand deposits held by banks.
- Broad money, on the other hand, includes not only narrow money but also time deposits of banks, savings deposits of banks, and other non-cash forms of money.
- The treatment of time deposits of banks is the key factor that differentiates narrow and broad monies.
- Time deposits, also known as certificates of deposit (CDs), are deposits made with banks for a specified period of time. They typically offer higher interest rates than demand deposits but have restrictions on withdrawal before the maturity date.
- In the case of narrow money, time deposits are excluded from the definition, as they are less liquid and not readily available for transactions.
- In contrast, broad money includes time deposits, as they represent a portion of the overall money supply that can be accessed by individuals and businesses for transactions.
- The inclusion of time deposits in broad money provides a broader measure of the money supply, reflecting the different degrees of liquidity and availability of funds for spending or saving.
- Therefore, the treatment of time deposits of banks is the primary distinction between narrow and broad monies.
Explanation:
- Narrow money refers to the most liquid forms of money that are readily available for transactions. It includes currency in circulation and demand deposits held by banks.
- Broad money, on the other hand, includes not only narrow money but also time deposits of banks, savings deposits of banks, and other non-cash forms of money.
- The treatment of time deposits of banks is the key factor that differentiates narrow and broad monies.
- Time deposits, also known as certificates of deposit (CDs), are deposits made with banks for a specified period of time. They typically offer higher interest rates than demand deposits but have restrictions on withdrawal before the maturity date.
- In the case of narrow money, time deposits are excluded from the definition, as they are less liquid and not readily available for transactions.
- In contrast, broad money includes time deposits, as they represent a portion of the overall money supply that can be accessed by individuals and businesses for transactions.
- The inclusion of time deposits in broad money provides a broader measure of the money supply, reflecting the different degrees of liquidity and availability of funds for spending or saving.
- Therefore, the treatment of time deposits of banks is the primary distinction between narrow and broad monies.
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Community Answer
The basic distinction between narrow and broad monies is thea)Treatmen...
Explanation:
Narrow Money:
- Narrow money consists of currency in circulation plus demand deposits, which are funds held in checking accounts.
- Time deposits of banks are not included in narrow money.
- Narrow money focuses on liquid assets that are easily accessible for transactions.
Broad Money:
- Broad money includes not only narrow money components but also time deposits of banks.
- Time deposits of banks are considered less liquid than demand deposits but are still a part of broad money.
- Broad money provides a more comprehensive measure of the money supply in an economy.
Explanation of Answer:
The basic distinction between narrow and broad monies lies in the treatment of time deposits of banks. Narrow money includes only currency in circulation and demand deposits, while broad money incorporates not only these components but also time deposits of banks. This difference highlights the varying degrees of liquidity and accessibility of funds within each measure of the money supply. Time deposits are excluded from narrow money as they are less liquid than demand deposits, which are the primary focus of narrow money. On the other hand, broad money includes time deposits to provide a more inclusive measure of the money supply that accounts for both liquid and less liquid assets held by the public.
Narrow Money:
- Narrow money consists of currency in circulation plus demand deposits, which are funds held in checking accounts.
- Time deposits of banks are not included in narrow money.
- Narrow money focuses on liquid assets that are easily accessible for transactions.
Broad Money:
- Broad money includes not only narrow money components but also time deposits of banks.
- Time deposits of banks are considered less liquid than demand deposits but are still a part of broad money.
- Broad money provides a more comprehensive measure of the money supply in an economy.
Explanation of Answer:
The basic distinction between narrow and broad monies lies in the treatment of time deposits of banks. Narrow money includes only currency in circulation and demand deposits, while broad money incorporates not only these components but also time deposits of banks. This difference highlights the varying degrees of liquidity and accessibility of funds within each measure of the money supply. Time deposits are excluded from narrow money as they are less liquid than demand deposits, which are the primary focus of narrow money. On the other hand, broad money includes time deposits to provide a more inclusive measure of the money supply that accounts for both liquid and less liquid assets held by the public.
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The basic distinction between narrow and broad monies is thea)Treatment of post office deposits.b)Treatment of time deposits of banks.c)Treatment of savings deposits of banks.d)Treatment of currency.Correct answer is option 'B'. Can you explain this answer?
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