WBCS.LIVE practice question

Following concept of money supply is called ‘Narrow Money’:

Solve this multiple-choice question and check the correct answer with its explanation below.

Answer options

  1. M1
  2. M2
  3. M3
  4. M4

Correct answer and explanation

Correct answer: M1

Explanation: In India, the RBI classifies money supply into four measures – M1, M2, M3, and M4. Among these, M1 is known as ‘Narrow Money’. It includes the most liquid forms of money: • Currency with the public • Demand deposits with banks • Other deposits with RBI Since M1 represents money readily available for transactions, it is called ‘Narrow Money’. Broader measures like M3 (Broad Money) also include time deposits, reflecting fewer liquid assets.