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Legal Definitions: Broad money and Narrow Money Video Lecture | SSC CGL Tier 2 - Study Material, Online Tests, Previous Year

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FAQs on Legal Definitions: Broad money and Narrow Money Video Lecture - SSC CGL Tier 2 - Study Material, Online Tests, Previous Year

1. What is the definition of broad money?
Ans. Broad money refers to the total amount of money in circulation within an economy. It includes physical currency, such as coins and banknotes, as well as the balances held in checking accounts and other types of demand deposits.
2. What is the definition of narrow money?
Ans. Narrow money, also known as M1, represents the most liquid forms of money in an economy. It includes physical currency, such as coins and banknotes, along with the balances held in checking accounts that can be easily accessed for transactions.
3. What is the difference between broad money and narrow money?
Ans. The main difference between broad money and narrow money lies in their components. Broad money includes a wider range of assets, such as savings accounts and time deposits, while narrow money represents only the most liquid forms of money, including physical currency and checking account balances.
4. Why is it important to measure broad money and narrow money separately?
Ans. Measuring broad money and narrow money separately is important because it provides insights into the overall liquidity and stability of an economy. It helps policymakers in monitoring the money supply growth, assessing inflationary pressures, and formulating appropriate monetary policies.
5. How are broad money and narrow money indicators used in economic analysis?
Ans. Broad money and narrow money indicators are used in economic analysis to understand the behavior of money supply and its impact on various economic variables. Economists and policymakers analyze these indicators to assess the level of liquidity in the economy, measure inflationary pressures, and gauge the effectiveness of monetary policies. Additionally, these indicators are often used to study the velocity of money, which measures how quickly money circulates within the economy.
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