The Reserve Bank of India publishes four measures of money supply. Which one of the measures is the least liquid in them?

Option 1 -> M₁ is the most liquid as it includes currency (CU) and demand deposits (DD) which can be used immediately.

Option 2 -> M₂ adds Post Office savings deposits to M₁, reducing liquidity slightly as these may have some withdrawal restrictions.

Option 3 -> M₃ adds time deposits of commercial banks to M₁, which are less liquid due to fixed maturity periods.

Option 4 -> M₄ adds total Post Office deposits to M₃, making it the broadest and least liquid measure.

Hence, Option 4: M₄ = M₃ + Total deposits with Post Office savings organisations -> M₄ is the least liquid measure of money supply because it is the broadest aggregate, including all components of M₃ plus total deposits with Post Office savings organizations (including time deposits and recurring deposits). As we move from M₁ to M₄, liquidity decreases because we keep adding less liquid financial assets. M₁ has the highest liquidity (cash and demand deposits), while M₄ has the lowest liquidity as it includes time-bound deposits and savings instruments that cannot be immediately converted to cash without penalties or waiting periods -> correct