ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -: a system or stage of economic life in which money replaces barter in the exchange of goods.

Detailed explanation-2: -MO Physical paper and coin currency in circulation, plus bank reserves held by the central bank also known as the monetary base. M1: All of M0, plus traveler’s checks and demand deposits. M2: All of M1, money market shares, and savings deposits.

Detailed explanation-3: -In a money-based economy, I can sell my services as a bassoon player in an orchestra to those who are willing to pay for orchestra concerts with money. Then, I can take the money I earn and pay for a variety of goods and services.

Detailed explanation-4: -Narrow money is also known as M1 and M2. Broad money means M3 and M4. The liquidity of these grades is decreasing. M1 is the most liquid and makes transactions the easiest, while M4 is the least liquid. The most commonly used indicator of the money supply is M3.