Class 12 Exam > Class 12 Questions > Which of the following is not a part of M1?a)...
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Which of the following is not a part of M1?
- a)Time deposit
- b)Demand deposit
- c)Both(a)and(b)
- d)Neither(a) nor (b)
Correct answer is option 'A'. Can you explain this answer?
Most Upvoted Answer
Which of the following is not a part of M1?a)Time depositb)Demand depo...
Definition of M1:
M1 is a measure of the money supply that includes all physical money, such as coins and currency, as well as demand deposits, traveler's checks, and other checkable deposits.
Components of M1:
- Demand Deposits: These are funds held in an account from which deposited funds can be withdrawn at any time without any advance notice to the depository institution.
- Traveler's Checks: These are preprinted, fixed-amount checks that are used as a substitute for cash while traveling.
- Other Checkable Deposits: These include accounts that allow depositors to write checks or make electronic transfers against the deposited funds.
Explanation:
Time deposits are not considered a part of M1 because they are not as liquid as demand deposits. Time deposits require the depositor to commit the funds for a specified period, and there may be penalties for early withdrawal. Since M1 includes only the most liquid forms of money that can be easily accessed for transactions, time deposits are excluded from this measure.
In conclusion, the correct answer is option 'A' - Time deposit is not a part of M1.
M1 is a measure of the money supply that includes all physical money, such as coins and currency, as well as demand deposits, traveler's checks, and other checkable deposits.
Components of M1:
- Demand Deposits: These are funds held in an account from which deposited funds can be withdrawn at any time without any advance notice to the depository institution.
- Traveler's Checks: These are preprinted, fixed-amount checks that are used as a substitute for cash while traveling.
- Other Checkable Deposits: These include accounts that allow depositors to write checks or make electronic transfers against the deposited funds.
Explanation:
Time deposits are not considered a part of M1 because they are not as liquid as demand deposits. Time deposits require the depositor to commit the funds for a specified period, and there may be penalties for early withdrawal. Since M1 includes only the most liquid forms of money that can be easily accessed for transactions, time deposits are excluded from this measure.
In conclusion, the correct answer is option 'A' - Time deposit is not a part of M1.
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Community Answer
Which of the following is not a part of M1?a)Time depositb)Demand depo...
Time deposits are less liquid in nature, so they are not a part of M , measure of money supply.
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