question_answer

India's total Money Supply (\[{{M}_{3}}\]) stood at Rs. 1,78,04,885 crore as on October 23rd 2020, recording a rise of 11.60% over the same time last year. Currency with the public stood at Rs. 26,19,612 up 21.2% over the year. Demand deposits with banks were up 10% at Rs. 16,25,734 crore. Time deposits with banks were also up 10% at Rs. 1,35,18,822 crore. The bank credit to commercial sector rose 5.2% on year to Rs. 1,09,99,604 crore.

Money supply in the economy has increased over the months. We can look at money supply from the component side and the sources side. One of the ways of measuring money supply in \[{{M}_{3}}\], which is a sum of the currency with the public, the demand deposits with the banking system, which include current deposits and savings deposits, the time deposits with the banking system, such as fixed deposits, recurring deposits, and other deposits of RBI. The currency with the public has grown by more than 21% since June and so have bank deposits. This has led to \[{{M}_{3}}\] growing by over 12% since June.

Heightened uncertainty in India caused by the Corona Virus pandemic has led to a surge in currency in circulation as people hoard cash or park money in accessible deposits to safeguard themselves against salary cut or job losses.

Foreign money continuously keeps coming into India, leading to an increase in demand for the Rupee against the Dollar. To prevent the Rupee from appreciating, RBI sold Rupees and bought Dollars adding to the increase in \[{{M}_{3}}\].

On the basis of above imaginary information, answer the following questions:

Sum of currency with public, demand deposits and time deposits with banks is.............. measure of money supply.

 

A) \[{{M}_{3}}\]

B) \[{{M}_{1}}\]

C) \[{{M}_{2}}\]

D) \[{{M}_{4}}\]