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Question
Answer the following question.
State any two components of the M1 measure of the money supply.
Solution
The following are the components of M1:
- Currency component - It includes currency notes and coins (collectively called the currency component of the money supply) that are issued by the monetary authority of a country. In India, the RBI issues currency notes of various denominations such as Rs 2, Rs 5, Rs 100, Rs 500 and Rs 1000 and the Government of India issues currency coins and notes of denominations less than and equal to Re 1.
- Deposit component - It includes the savings or the current account deposits held by the public in various commercial banks of a country. Deposits held by the public can be classified into two major categories- Term Deposits and Demand Deposits.
RELATED QUESTIONS
State the meaning and components of the money supply.
What are the alternative definitions of money supply in India?
The RBI Headquarters is located in ______.
The basic distinction between M1 and M2 is with regard to.
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What is money supply?
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One of the measures of the money supply is ______.
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Money supply in India may increase if, ______
- Reserve Bank of India (RBI) injects more money in circulation.
- The commercial banks expand their credit operation.
- Tax rates are reduced by the Central Government.
- Reserve Bank of India increases the Bank Rate.
Read the following statements carefully:
Statement 1: Money supply (M1) in India does not include ‘demand deposits’ with commercial banks.
Statement 2: Money supply (M1) refers to, assets available with the Commercial Banks during a particular period of time.
In the light of the given statements, choose the correct alternative.
