Question

Which one of the following is the major component of the money supply in the Indian Economy?

• A. Currency component
• B. Deposit component
• C. Treasury bills with public
• D. Both 'a' and 'b'

Answer 1

The correct option is D Both 'a' and 'b'

Both the currency in circulation and the deposits with banks are key components of the money supply. While the definition of Narrow Money (M1) only includes the demand deposits along with the currency in circulation, the definition of Broad Money (M3) also includes time deposits along with demand deposits and currency in circulation.