To answer the question, we need to understand what M1 refers to in the context of the money stock in India. M1 is a measure of the money supply that includes currency in circulation, demand deposits, and other deposits with the Reserve Bank of India (RBI).
Here is a detailed explanation:
Definition of M1:
M1 refers to the narrowest measure of the money supply in an economy. It includes the following components:
1. Currency in circulation:
- This includes all the physical money in the economy, such as coins and banknotes, that is held by individuals and businesses.
2. Demand deposits:
- Demand deposits are funds held in checking accounts or current accounts that can be withdrawn on demand without any notice.
- These deposits are typically held by individuals and businesses for everyday transactions.
3. Other deposits with RBI:
- This component includes deposits held by commercial banks and financial institutions with the Reserve Bank of India (RBI).
- These deposits are considered part of the money supply because they can be used to make payments and influence economic activity.
Explanation of options:
Now, let's go through the given options and see which one corresponds to M1 in the money stock in India:
A. Post office saving deposits:
- Post office saving deposits are not included in M1 as they are not part of the money supply in the broader sense.
B. Total post office deposits:
- Total post office deposits include various types of deposits, such as savings deposits, recurring deposits, and time deposits.
- While these deposits are part of the broader money stock in India, they are not specifically categorized as M1.
C. Currency plus demand deposits plus other deposits with RBI:
- This option correctly represents M1 in the money stock in India.
- It includes the components of M1, namely currency in circulation, demand deposits, and other deposits with RBI.
D. Time deposits with banks:
- Time deposits, such as fixed deposits, are not included in M1 as they are not readily available for transactions and have a maturity period.
Conclusion:
Based on the above explanation, the correct answer is option C: Currency plus demand deposits plus other deposits with RBI. This combination represents M1 in the money stock in India.