📢 Too many exams? Don’t know which one suits you best? Book Your Free Expert 👉 call Now!
  • google app store apple app store
    • ✖

      Question

      In the RBI’s monetary aggregate framework, M1 is known

      as Narrow Money due to its high liquidity. Which of the following combinations correctly identifies the components of M1?
      A Currency with the public + Savings deposits with Post Office savings banks Correct Answer Incorrect Answer
      B Currency with the public + Demand deposits with the banking system + 'Other' deposits with the RBI Correct Answer Incorrect Answer
      C Currency with the public + Time deposits with the banking system Correct Answer Incorrect Answer
      D Currency with the public + Total deposits with Post Office savings organisations Correct Answer Incorrect Answer
      E M3 – Currency with the public Correct Answer Incorrect Answer

      Solution

      M1 represents the Narrow Money which is the most liquid form of money. It if calculated as: M1 = Currency with the public + Demand deposits with the banking system + ‘Other’ deposits with the RBI ·        Where Currency with the public means notes and coins,  ·        Demand Deposits include current and savings accounts that can be withdrawn at any time, ·        Other deposits with the RBI are the deposits from foreign central banks, quasi-government agencies, etc. Note - From Board Money (M3), M1 can be calculated as: M1 = M3 - Time deposits with the banking system

      Practice Next
      More RBI and Monetary Policy Questions
      ask-question