ECONOMICS
MONETARY POLICY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Broad M4
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Narrow M0
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Either A or B
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None of the above
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Detailed explanation-1: -Definition. M4 is the Bank of England’s main broad measure of money supply. There is no target for M4 and in practice the central bank tends to follow an adjusted measure that excludes intermediate other financial corporations in order to get a handle on current underlying trends.
Detailed explanation-2: -Narrow money is a way of measuring and categorizing the money supply within an economy. It includes particular kinds of money that are highly liquid. The money supply is typically through an “M” scale, where M0 includes the narrowest forms, and M4 includes the broadest forms – M0/M1/M2/M3/M4.
Detailed explanation-3: -Besides all the components of M1, it includes net time deposits (or fixed deposits or term deposits) of the people with the commercial banks. Therefore, M3 is also called broad money.
Detailed explanation-4: -M0 is referred to as the “wide monetary base” or “narrow money” and M4 is referred to as “broad money” or simply “the money supply". M0: Notes and coin in circulation plus banks’ reserve balance with Bank of England.