question_answer

Suppose India's total money supply \[({{M}_{3}})\] stood at Rs. 17,50,000 crore as on August 15, 2020, recording a rise of 9.5% over the same time last year.

Currency with the public stood at Rs. 25, 75, 000 crore, up 19.5% over the year.

Demand deposits with banks were up 7% at Rs. 14,70,000 crore. Time deposits with the banks were up by 8% at Rs. 1,25,00,000 crore. The bank credit to commercial sector rose 4% on year to Rs. 1,05,00,000 crore.

Money supply in the economy has increased over the months. The currency with the public has increased by more than 15% and so have bank deposits. This has led to \[{{M}_{3}}\] growing by over 8% since June.

Due to Covid-19 pandemic in India, people have started keeping money to safeguard themselves against salary cut or job lossess.

However, money from abroad kept on coming in India. This leads to an increase in demand for the Rupee against Dollar. To maintain stability in foreign exchange rate. RBI sold Rupees and brought Dollars adding to an increase in \[{{M}_{3}}\].

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

\[{{M}_{3}}=\,\,{{M}_{1}}+.....................\].

 

A) Net time deposits with commercial banks

B) Precautionary transactory

C) Inflow of foreign currency

D) None of the above