The sum of which of the following constitutes Broad Money in India?1. Currency with the public2. Demand deposits with banks3. Time deposits with banks4. Other deposits with RBI Choose the correct answer using the codes given below:
✓ Correct answer: b) 1, 2 and 3
ExplanationThe total stock of money in circulation among the public at a particular point of time is called money supply.Option (b) is correct: Broad money (M3) represents the total money supply in the economy that is readily available for spending.It includes currency with the public and various bank deposits (demand and time deposits), but not the de- posits that commercial banks hold with the RBI.Broad money (M3) in India includes:Currency with the public: This refers to all currency notes and coins in circulation outside of banks.Demand deposits with banks: These are checking accounts or current accounts that allow depositors to withdraw funds on demand.Time deposits with banks: These are savings accounts or fixed deposits where funds are held for a specific period and cannot be withdrawn before maturity without penalty. “Other deposits with RBI” are a component of Reserve Mon- ey (M0), also known as high-powered money.These depos- its are held by commercial banks with the Reserve Bank of India (RBI) and are part of the monetary base.While they are important for monetary polic
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