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Question

Consider the following statements related to money supply:-

Which of the above statements are incorrect?


A

2 and 3 only

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B

2, 3 and 4 only

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C

1, 2 and 4 only

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D

1, 2 and 3 only

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Solution

The correct option is D

1, 2 and 3 only


(source: NCERT) M1 = Cash+ DD + OD

M2= M1+ saving deposits with post office savings banks.

M3= M1 + Net time deposit of commercial banks.

M4 = M3+ total deposits with post office savings organizations (excluding National Savings Certificate)

M1+ M2= Narrow Money

M3+M4= Broad Money

From above explanation statements 1, 2 and 3 are incorrect only 4th statements is correct.


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