Consider the following pairs Money Components 1 Reserve Money Currency in circulation Bankers r...........

Economic Affairs Money Supply and Monetary Policy

Consider the following pairs.

Money	Components
1. Reserve Money	Currency in circulation + Bankers’ Deposits with the RBI + ‘Other’ deposits with the RBI.
2. Narrow Money	Currency with the Public + Demand Deposits with the Banking System + ‘Other’ deposits with the RBI.
3. Broad Money	Currency in circulation + Bankers’ Deposits with the RBI + ‘Other’ deposits with the RBI+ Time Deposits with the Banking System.

Which of the pairs is/are correctly matched?

1&2 only

2&3 only

All the above

None

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Explanation:

Reserve Money (M0) = Currency in circulation + Bankers’ Deposits with the RBI + ‘Other’ deposits with the RBI.
Narrow Money (M1) = Currency with the Public + Demand Deposits with the Banking System + ‘Other’ deposits with the RBI.
M2 = M1 + Savings Deposits of Post-office Savings Banks.
Broad Money (M3) = M1 + Time Deposits with the Banking System.
M4 = M3 + All deposits with Post Office Savings Banks (excluding National Savings Certificates).
Do you know?
•As we move from M1 to M4 the liquidity (inertia, stability, spend ability) of the money goes on decreasing and in the opposite direction, the liquidity increases.
THINK!
•High power money