BANKING GENERAL KNOWLEDGE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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M2’ M1 +demand deposits with post offices
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M3’ M1 +term deposits with banks
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M4’M3+total deposits with post offices
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All the above
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Detailed explanation-1: -Solutions for Which of the following about money supply measure adopted in 1977 is correct? a)M2= M1 +demand deposits with post officesb)M3= M1 +term deposits with banksc)M4= M3+total deposits with post officesd)All the aboveCorrect answer is option ‘D’.
Detailed explanation-2: -From 1977 to 1998, RBI used four monetary aggregates – M1, M2, M3 and M4 – to measure money supply. The central bank also used the concept of Reserve Money. However, measuring standards changed in 1998.
Detailed explanation-3: -M0 = Currency notes + coins + bank reserves. M1 = M0 + demand deposits. M2 = M1 + marketable securities + other less liquid bank deposits. M3 = M2 + money market funds. M4 = M3 + least liquid assets.
Detailed explanation-4: -M4: Cash outside banks (i.e. in circulation with the public and non-bank firms) plus private-sector retail bank and building society deposits plus private-sector wholesale bank and building society deposits and certificates of deposit.
Detailed explanation-5: -M1 = Currency with the public + Demand deposits with the banking system + ‘Other’ deposits with the RBI. M4 = M3 + All deposits with post office savings banks (excluding National Savings Certificates).