Question

Consider the following sources
1) Net bank credit to the government.
2) Bank credit to the commercial sector.
3) Net foreign exchange assets of the banking system.
Which of the sources given above is / are the major sources of the 'Broad Money' in the India economy ?

• A. Only 2
• B. 1 and 3
• C. 2 and 3
• D. All of these

Answer 1

The correct option is D All of these

Broad Money is a measure of the money supply in the system. It includes currency with the public, demand deposits and time deposits with the banks and other deposits with the RBI.

Basically, Broad Money = Net bank credit to the Govt + bank credit to the commercial sector + Net foreign exchange assets of the banking system + Govt's current liabilities to the public - Net non-monetary liabilities of the banking sector (other than time deposits).