question_answer

State the meaning and components of money supply.

Answer:

Money supply refers to the total value of money held by public at a particular point of time.

Components of Money Supply

(a) \[{{M}_{1}}\]= It is the first and basic measure of money supply.

\[{{M}_{1}}\] = Currency and coins with Public + Demand deposits of commercial banks + other deposits.

(b)\[{{M}_{2}}\] = It is the broader concept.

\[{{M}_{2}}\] = mi + saving deposits with Post Office Saving Bank

(c) \[{{M}_{3}}\] = Broader concept

\[{{M}_{3}}\] = \[{{M}_{1}}\] + Net time deposits with banks.

(d) \[{{M}_{4}}\] = \[{{M}_{3}}\] + Total deposits with post office saving bank (Excluding NSC)