Which among the following represents the currency notes and coins as well as net demand deposits held in commercial banks?

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Solution

The correct option is A M1
The total money supply in India is calculated using four components, namely M1, M2, M3, and M4. The money in M1 and M2 is readily available to be spent and is constantly in circulation in the economy. Hence, it is identified as narrow money.

M1 represents all the currency notes and coins as well as net demand deposits held in commercial banks. It can be expressed as:

M1 = Currency notes and coins + Net demand deposits held in commercial banks

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