Question

In an economy, the currency held by the public, Net Demand Deposits with Commercial Banks and Net Time Deposits with Commercial Banks stand at ₹ 1,42,000 crore, ₹ 22,000 crore and ₹ 86,000 crore respectively. The value of Money Supply (M₁) would be ₹ ______ crore.

Options

• 2,50,000

• 86,000

• 1,64,000

• 1,42,000

Answer 1

In an economy, the currency held by the public, Net Demand Deposits with Commercial Banks and Net Time Deposits with Commercial Banks stand at ₹ 1,42,000 crore, ₹ 22,000 crore and ₹ 86,000 crore respectively. The value of Money Supply (M₁) would be ₹ 1,64,000 crore.

Explanation:

The M1 measure of money supply, also known as narrow money, consists of the most liquid assets: currency held by the public and demand deposits with the banking system. It specifically excludes time deposits (fixed deposits).

M₁ = Currency with Public + Net Demand Deposits

M₁ = 1,42,000 crore + 22,000 crore

= 1,64,000 crore