Question

M1 includes net demand deposits and not gross demand deposits, as net demand deposits do not include inter-banking claims.

• A. True
• B. False

Answer 1

The correct option is A True

True.

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 among which M1 is a type of measurement that measures the money as a medium of exchange function.

M1= C+ DD+ OD

where,

C: It refers to currency held by public in terms of coins and paper notes.

DD: It refers demand deposits of the people with the commercial bank.

OD: These includes other deposits with public financial institution, foreign central banks and international financial institution.