Choose the correct statement in relation to money supply.

The difference between M1 and M2 is post office deposits.

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The difference between M3 and M4 is savings deposits with Post Office Savings Bank.

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The difference between M1 and M2 is time deposits.

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The difference between M1 and M3 is time deposits.

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Solution

The correct option is D The difference between M1 and M3 is time deposits.
M1 represents the money that is readily available in the economy. It includes all currency notes and coins available in the country plus the demand deposits. M2 includes the value of M1 plus the savings deposits with the Post Office Savings Bank. M3 includes M1 plus time deposits. M4 includes M3 plus the total deposits with the Post Office Savings Bank.

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