Question

Explain the meaning of M₁ measures of money supply.

Answer 1

[M₁] = Currency notes and coins with the public (C) + Demand deposits of the people with commercial banks (DD) + Other deposits with the RBI (OD) include those held by public financial institutions, foreign central banks, foreign governments, and international financial organisations.

Thus, M₁ = C + DD + OD

M₁ measures of money supply take money in a narrow sense.