Question

What do you mean by the concept of money supply with the public?

Answer 1

1. Money supply refers to the total amount of money held by the ‘public’ within a country. Here, the term ‘public’ includes all economic entities such as individuals, businesses, and institutions operating in the economy but excludes money-issuing authorities like the central bank, government, and commercial banks. This means that currency kept by the government in its treasury and funds held by the central and commercial banks are excluded from the money supply to prevent counting the same money twice. Moreover, this excluded money is not actively circulating in the economy. The concept of money supply specifically pertains to money that is in actual circulation, not the reserves held by the government or banks.
2. Money supply is considered a stock concept, meaning it is measured at a specific point in time for example, the amount of money circulating in India on 1st January, 2020.