Question

Demand deposits are included in ________.

• A. M1
• B. M2
• C. Both
• D. None

Answer 1

The correct option is C Both

Money supply refers to the total stock of money of all types ( currency as well as demand deposits) held by the people of a country at a given point of time.

Money supply is measured in several ways which includes M1, M2, M3 and M4 measurement of money supply. Every measurement has it own definition with different components varying from most liquid to most rigid form.

Demand deposits refers to the deposits of the people which is held by the commercial banks which can be withdrawn on demand. These are included in M1 and M2 measurement of money supply as they are considered the liquid money supply in the economy.