1.

Explain the meaning of M1 and M4 supply of money.

Answer»

The supply of money consists of various components. M1 and M4 are also components of the money supply.

M1 = Currency notes and coins with the public (C) + Demand deposits with the banks (DD) + Other deposits with the RBI (OD)

Thus. M1 = C + DD + OD

and M4 = M1 + Saving deposit with post office saving bank (SD) + Total deposits with post office savings organisation (TDP)

Thus, M4 = M2 + TDP 

where M2 = M1 + SD.



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