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    Question

    Which of the following is NOT a component of M1 money

    supply in India?
    A Currency with the public Correct Answer Incorrect Answer
    B Demand deposits with banks Correct Answer Incorrect Answer
    C Other deposits with RBI Correct Answer Incorrect Answer
    D Time deposits with banks Correct Answer Incorrect Answer
    E Traveler's checks Correct Answer Incorrect Answer

    Solution

    • In India's monetary aggregates:
      • M1 (Narrow Money)  =  Currency with the Public  +  Demand Deposits with Banks  +  'Other' Deposits with RBI  (which mainly comprises deposits of foreign central banks, international institutions, etc.).
      • Time Deposits  (fixed deposits, recurring deposits) are  not  part of M1. They are included in  M3 (Broad Money) , which is M1 + Time Deposits with Banks. M1 represents the most liquid forms of money readily available for transactions.

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