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    Question

    The elements given below are some of the parts of the M4

    money supply of Indian economy   (a) Broad money (M3) (b) All deposits with the post office savings bank (c) National savings certificate Choose the correct option which constitute M4
    A Only a and b Correct Answer Incorrect Answer
    B Only b and c Correct Answer Incorrect Answer
    C Only a and c Correct Answer Incorrect Answer
    D a, b, and c Correct Answer Incorrect Answer
    E Only c Correct Answer Incorrect Answer

    Solution

    The four measures of money supply are: ·       M1 = C + DD + OD ·       M2 = M1 + Saving deposits with the post office saving banks ·       M3 = M1 + Time deposits with the Banks ·       M4 = M3 + Total deposits with the post office saving organizations The new measures of money supply are: ·       NM1 = C + DD + OD ·       NM2 = NM1 + Short-term time deposits of residents (including and up to the contractual maturity of one year) NM3 = NM2 + Long-term time deposits of residents + Call/Term funding from financial institutions.  M3 and M4 are broad measures of money supply whereas M1 and M2 are narrow measures of money supply.

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