M1= Currency will Public + ______ + Other Deposits with RBIa)Time deposits with post officesb)Demand deposits with commercial banksc)Time deposits with commercial banksd)Demand deposits with post officesCorrect answer is option 'B'. Can you explain this answer?

Question

Answer

Explanation:

The given question is related to the components of money supply. The money supply consists of various components, including currency, demand deposits, time deposits, etc. The money supply is measured by the Reserve Bank of India (RBI) and is an important indicator of the economy's health.

Components of Money Supply:

The following are the components of money supply:

Currency: It refers to the notes and coins issued by the RBI and circulated in the economy.

Demand Deposits: It refers to the deposits that can be withdrawn on demand by the depositor. These deposits are held by commercial banks.

Time Deposits: It refers to the deposits that cannot be withdrawn before a specified period. These deposits are held by post offices and commercial banks.

M1 Money Supply:

M1 is a measure of the money supply that includes currency in circulation and demand deposits held by commercial banks. M1 is also known as narrow money and is the most liquid measure of the money supply.

Answer:

According to the given question, M1 includes currency and other deposits with the RBI. The correct option is B, which refers to demand deposits with commercial banks. Therefore, the correct answer is that currency will public demand deposits with commercial banks.

Answer

M₁ is the most liquid form of money measure which is comprised of CC+ DD + OD

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