Consider the following statements 1 M3 is known popularly as lsquo Narrow Money rsquo and M1 is know...........

Economic Affairs Money Supply and Monetary Policy

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Consider the following statements:

1.M3 is known popularly as ‘Narrow Money’ and M1 is known as ‘Broad Money’

2.GDP at factor cost = GDP – Depreciation allowances

Which of these is/are correct?

1 only

2 only

Both 1 & 2

Neither 1 nor 2

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Explanation:

1st statement is incorrect.
M3 is a measure of the money supply that includes M2 as well as large time deposits, institutional money market funds, short-term repurchase agreements and other larger liquid assets. The M3 measurement includes assets that are less liquid than other components of the money supply and are referred to as "near, near money," which are more closely related to the finances of larger financial institutions and corporations than to those of small businesses and individuals.
M1 is a metric for the money supply of a country and includes physical money — both paper and coin — as well as checking accounts, demand deposits and negotiable order of withdrawal (NOW) accounts. The most liquid portions of the money supply are measured by M1 because it contains currency and assets that can be converted to cash quickly.
2nd statement is incorrect.
GDP(FC) = GDP(MP) -Indirect Taxes + Subsidies