UPSC Prelims 1997 · General Studies
Question 17: Economy and Social Development
The sum of which of the following constitutes Broad Money in India? I. Currency with the Public II. Demand deposits with banks III. Time deposits with banks IV. Other deposits with RBI Choose the correct answer using the codes given below:
AnswerThe answer is (c).
India's broad money (M3) is currency with the public, plus demand deposits with banks, plus time deposits with banks, plus other deposits with the RBI. Narrow money (M1) is the same without the time deposits. Broad money counts all the money the public holds that can be spent directly or turned into spendable form with ease.
- I. Currency with the public is a part of broad money.
- II. Demand deposits with banks are included.
- III. Time deposits with banks are the addition that turns M1 into broad money.
- IV. Other deposits with the RBI are included in both M1 and M3.
Why each option is right or wrong
- (a) I and II are only part of M1, without time deposits and the RBI's other deposits.
- (b) This leaves out other deposits with the RBI, which M3 includes.
- (c) Right: all four make up broad money.
- (d) I, II and IV together make narrow money M1; time deposits are what make it broad.
Explanation: written by UPSC Grade, not by UPSC.
Source: UPSC, Civil Services (Preliminary) Examination 1997, General Studies. UPSC's own paper isn't online; the words are from a published compilation. The paper on upsc.gov.in.