Which of the following is correct with respect to the fourth stage of money supply?

M4 = M1 + Time deposits

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M4 = M1 + Total deposits with Post Office Savings Bank

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M4 = M1 + Time deposits + Total deposits with Post Office Savings Bank

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M4 = M3 + Time deposits

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Solution

The correct option is C M4 = M1 + Time deposits + Total deposits with Post Office Savings Bank
M4 includes M3 plus all the total deposits with Post Office Savings Bank. M3 includes M1 plus time deposits. M1 represents the money that is readily available in the economy plus demand deposits. M2 is the value of M1 plus the savings deposits with Post Office Savings Bank.

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