Question

Mention the components of M₁, M₂, and M₃ measures of money supply by the RBI.

Answer 1

Components of measures of money supply by RBI:

M₁ = C + DD + OD

C = Currency held by the public. It includes coins and paper notes.

DD = Demand deposits of the people with the commercial banks.

OD = Other deposits with RBI, except deposits of the government of the country, and deposits of the country’s banking system with RBI.

M2 = M1 + Deposits with Post Office Saving Bank Account.

M3 = M1 + Net Time Deposits with Commercial Banks.