Which of the following shows the meaning of the term M3?a)M1+ post office savings depositsb)Currency + coins + demand deposits of banksc)M1+ Time Deposits of Banksd)None of the aboveCorrect answer is option 'C'. Can you explain this answer?

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Which of the following shows the meaning of the term M₃?

a)
M₁ + post office savings deposits
b)
Currency + coins + demand deposits of banks
c)
M₁ + Time Deposits of Banks
d)
None of the above

Correct answer is option 'C'. Can you explain this answer?

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Test: Money And Banking - 1

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Which of the following shows the meaning of the term M3?a)M1+ post off...

RBI calculates the four concepts of money supply in India . They are called as Money aggregates or Money stock measures.

M1 (Narrow Money):

At any point of time,money held with the public has two most liquid components:

Currency component- consists of all the notes and coins in circulation.

Demand deposit component- money of the general public with the banks,which can be withdrawn using cheques,ATM’s,withdrawls.

M1= Currency held with the public + Demand deposits of public in the bank+ Other deposits of RBI.

Broad Money:

Narrow Money is the most liquid part of the money supply because the demand deposits can be withdrawn any time. Time deposits on the other hand have a fixed maturity period and cannot be withdrawn before the expiry of this period.

M3= Narrow Money (M1) + Time deposits of public with banks.

M2=Narrow Money (M1) + Post office savings.

M4= M3 + Post Office savings.

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Which of the following shows the meaning of the term M3?a)M1+ post office savings depositsb)Currency + coins + demand deposits of banksc)M1+ Time Deposits of Banksd)None of the aboveCorrect answer is option 'C'. Can you explain this answer?

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