Which of the following are included in M1 definition of money for the Indian economy?
- 1. Reserves
- 2. Currency
- 3. Time deposits
- 4. Demand deposits
Select the correct answer using the code given below.
1 and 3 only
2 and 3
2 and 4
1, 3 and 4
Answer is Wrong!
Answer is Right!
This question was previously asked in
UPSC CDS-1 – 2024
– The definition of M1 is: M1 = Currency with the Public + Demand Deposits with the Banking System + ‘Other’ Deposits with the RBI.
– Based on this definition:
– 1. Reserves: These refer to cash reserves held by commercial banks with the RBI. They are part of the monetary base (M0), not M1. M1 is the money supply held by the non-bank public.
– 2. Currency: Currency notes and coins held by the public are a component of M1.
– 3. Time deposits: These include fixed deposits and recurring deposits. They are less liquid than demand deposits and are included in broader measures of money supply like M2, M3, and M4, but not M1.
– 4. Demand deposits: These are deposits held in current and savings accounts that can be withdrawn on demand (e.g., through cheques or ATM withdrawals). They are a component of M1.
– Therefore, currency and demand deposits are included in the M1 definition of money for the Indian economy.