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Arrange the following alternative measures of money supply in decreasing order of liquidity.

Where CU= Currency and DD = Demand Deposit

A. CU + DD

B. CU + DD + Net time deposits of commercial banks

C. CU + DD + Savings deposits with Post Office savings banks

D. CU +DD + Net time deposits of commercial banks +Total deposits with Post Office savings organizations (excluding NSC)

Choose the correct sequence from the options given below:

Solution

✅ Correct Option: 2

The RBI measures are M1=CU+DDM_1 = CU + DD (most liquid), M2=M1+M_2 = M_1 + savings deposits with post office savings banks, M3=M1+M_3 = M_1 + net time deposits of commercial banks, and M4=M3+M_4 = M_3 + total post office deposits excluding NSC (least liquid). In decreasing order of liquidity: A, C, B, D.

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