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One of the measures of money supply is
- a)N1
- b)O1
- c)M1
- d)P1
Correct answer is option 'C'. Can you explain this answer?
Most Upvoted Answer
One of the measures of money supply isa)N1b)O1c)M1d)P1Correct answer i...
There are several standard measures of the money supply, including the monetary base, M1, and M2. The monetary base is defined as the sum of currency in circulation and reserve balances (deposits held by banks and other depository institutions in their accounts at the Federal Reserve).
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One of the measures of money supply isa)N1b)O1c)M1d)P1Correct answer i...
Money Supply
Money supply refers to the total amount of money available in an economy at a given point in time. It includes all currency in circulation, demand deposits, and other liquid assets held by individuals and businesses.
M1
M1 is one of the measures of money supply. It represents the most liquid components of the money supply and includes:
- Currency in circulation: This refers to the physical currency, such as banknotes and coins, that is in the hands of the public and not held by banks.
- Demand deposits: Demand deposits are funds held in checking accounts that can be withdrawn by the account holder at any time without prior notice.
- Traveler's checks: Traveler's checks are a form of prepaid checks that can be used as a substitute for cash while traveling.
- Other checkable deposits: This includes deposits in checking accounts that are not demand deposits, such as negotiable order of withdrawal (NOW) accounts.
M1 is considered the narrowest measure of money supply as it includes only the most liquid forms of money that can be readily used for transactions.
Other Options
Option 'A' (N1) and option 'B' (O1) are not recognized measures of money supply.
Option 'D' (P1) is not a commonly used measure of money supply. It is important to note that different countries may use different measures of money supply, but M1 is widely accepted as a key measure in many economies.
Conclusion
The correct answer to the question is option 'C' (M1), as it represents one of the measures of money supply that includes currency in circulation, demand deposits, traveler's checks, and other checkable deposits.
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One of the measures of money supply isa)N1b)O1c)M1d)P1Correct answer is option 'C'. Can you explain this answer?
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