Question

Why are Cash Deposits of the government and of the Commercial Banks with the RBI not treated as a part of Money Supply?

Answer 1

Dear Student

Cash Deposits of the Government and of the Commercial Banks with the RBI are not treated as a part of money supply because they are suppliers or producers of money and cash balances held by them are not in actual circulation.
Money supply only includes currency held by public and net demand deposits in banks.


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