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The difference between narrow money and broad money is.
- a)Coins and currency
- b)Currency
- c)Saving deposits of Banks
- d)Time deposits with of banks
Correct answer is option 'D'. Can you explain this answer?
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The difference between narrow money and broad money is.a)Coins and cur...
Narrow Money
Broad Money
Difference between Narrow Money and Broad Money
Therefore, option D is the correct answer as time deposits with banks are included in broad money and not in narrow money.
- Narrow money is also known as M1 money supply.
- It includes coins, currency notes, demand deposits, and other deposits held by the central bank.
- It is the most liquid form of money supply as it can be easily converted into cash.
- It is used for day-to-day transactions and is also known as the transactional money supply.
- It is not suitable for long-term investment as it does not earn any interest.
Broad Money
- Broad money is also known as M3 money supply.
- It includes all the components of narrow money along with time deposits, savings deposits, and other deposits with a maturity period of less than two years.
- It is less liquid as compared to narrow money as it cannot be easily converted into cash.
- It is used for both transactional and investment purposes and is also known as the investment money supply.
- It earns interest and is suitable for long-term investment.
Difference between Narrow Money and Broad Money
- The main difference between narrow money and broad money is the inclusion of time deposits in broad money.
- Narrow money is the most liquid form of money supply while broad money is less liquid as compared to narrow money.
- Narrow money is suitable for day-to-day transactions while broad money is suitable for both transactional and investment purposes.
- Narrow money does not earn any interest while broad money earns interest and is suitable for long-term investment.
Therefore, option D is the correct answer as time deposits with banks are included in broad money and not in narrow money.
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The difference between narrow money and broad money is.a)Coins and currencyb)Currencyc)Saving deposits of Banksd)Time deposits with of banksCorrect answer is option 'D'. Can you explain this answer?
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